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Allie and Sarah decided that they want to purchase renters insurance for the apartment they share. They made a list of all of the items to be covered by the insurance policy, along with their estimated values. If the items to be covered total more than $3000, the insurance company charges an annual premium of 23% of the total value of the items. If the items to be covered total $3000 or less, the insurance company charges an annual premium of 20% of the total value of the items. Using the list of items Allie and Sarah provided, determine their monthly renters insurance premium. Allie's Stuff Sarah's Stuff TV ($250) Stereo ($75) Stereo ($150) Bicycle ($250) CD's ($225) CD's ($130) DVD's ($385) DVD's ($300) Bicycle ($400) IPOD ($80) Microwave ($30) Computer ($675) Laptop Computer ($950) a. $65.00 b. $74.75 c. $325.00 d. $780.00

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Answer:

The answer is b. $ 74.75

Explanation:

  • First, we need to gather the data from the question.

Data:

Let x be the value of items to be insured.

1. if the items are more than $ 3 000 it means that x is greater than $ 3000 and the annual premium will be 23 % of the total value.

2. if the items are less or equal to $ 3 000, it means that x ≤ $ 3 000 ( in other words, x is less than or equal to $ 3 000)

  • Second, we find the total worth of all the items. Adding up all the values gives $ 3900 which is more than $ 3 000. Therefore, rule 1 applies.

The annual premium for the goods will be:

annual premium = 23 % × $ 3900

= $ 897

However, the premium is supposed to be paid monthly. Divide the total premium by 12 to get:

$ 897/12 = $ 74.75

This is option c.

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