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? $3,600 $4,000 $3,800 $3,200

Explanation:

Step1: Recall the formula for premium

The annual premium for insurance 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 decimal

The rate is \(0.4\%\), to convert this to a decimal, we divide by 100: \(0.4\%=\frac{0.4}{100} = 0.004\)

Step3: Calculate the premium

The property value is \(\$950,000\). Using the formula from Step 1: \(\text{Premium}=950000\times0.004\)
Calculating the product: \(950000\times0.004 = 3800\)

Answer:

\$3,800