Question

parker is considering a homeowner’s insurance policy that offers coverage of $200,000. the insurance policy has a premium rate of 0.25% annually. what is the annual premium that parker would need to pay?
enter your answer in the box below.
$\square$

Explanation:

Step1: Recall the formula for premium

The annual premium is calculated by multiplying the coverage amount by the premium rate (in decimal form). The formula is: \( \text{Annual Premium} = \text{Coverage Amount} \times \text{Premium Rate (decimal)} \)

Step2: Convert the percentage to decimal

The premium rate is \( 0.25\% \). To convert a percentage to a decimal, we divide by 100. So, \( 0.25\% = \frac{0.25}{100} = 0.0025 \)

Step3: Calculate the annual premium

The coverage amount is \( \$200,000 \). Using the formula from Step1: \( \text{Annual Premium} = 200000 \times 0.0025 \)
\( 200000 \times 0.0025 = 500 \)

Answer:

\( 500 \)