Question

a business owner is seeking property insurance for their commercial property valued at $950, 000. the insurance company offers a rate of 0.4%. what is the annual premium? $4,000 $3,600 $3,200 $3,800

Explanation:

Step1: Recall the formula for premium

The annual premium is calculated by multiplying the property value by the insurance rate. The formula is: \(\text{Premium} = \text{Property Value} \times \text{Rate}\)

Step2: Convert the rate to a decimal

The insurance rate is \(0.4\%\). To convert a percentage to a decimal, we divide by 100. So, \(0.4\%=\frac{0.4}{100} = 0.004\)

Step3: Calculate the premium

The property value is \(\$950,000\). Using the formula from Step 1, we have:
\(\text{Premium}=\$950,000\times0.004\)
\(\$950,000\times0.004 = \$3,800\)

Answer:

\$3,800