Question

Stephanie has a homeowners insurance policy for her $355,000 home with an annual premium of $0.42 per $100 of value and a deductible of $500. Under this policy, in the event of a major mishap, Stephanie would have a total annual out-of-pocket expense of [($355,000/100) x $0.42] + $500 = $1,991
Stephanie would like to lower her premium by increasing her deductible. If Stephanie wants to increase her deductible to $1000, what annual premium would result in an annual out-of-pocket expense that is about the same as her current plan?
a. $0.16 per $100 of value
b. $0.28 per $100 of value
c. $0.35 per $100 of value
d. $0.46 per $100 of value\

ANSWER IS B ($0.28 per $100 of value) ON E2020

Answer 1

B. 0.28 per $100 of value 

Answer 2

Answer:

Amount of insurance policy for Stephanie = $ 355,000

Annual premium = $ 0.42 per $100

Deductible amount = $ 500

Total Annual out of pocket expense = [($355,000/100) x $0.42] + $500

                         = $1,991

Now, New Deductible amount that Stephanie wants = $ 1000

Let annual premium be x .

→$\frac{3,55,000x}{100}$  + $ 1,000 = 1900

→ 3550 x = 1900 - 1000

→3550 x= 900

→ x = $\frac{900}{3550}$

x = 0.2535(approx)

x = $0.25 per $100