Question

a client wants to purchase a mortgage insurance policy for a loan amount of $300,000. the insurance rate offered is 0.6% annually. what is the annual premium for this mortgage insurance policy? $1,500 $1,800 $1,200 $2,400

Explanation:

Step1: Recall the formula for premium

The formula to calculate the annual premium (P) is \( P=\text{Loan Amount}\times\text{Insurance Rate} \).

Step2: Convert the rate to decimal

The insurance rate is \( 0.6\% \), which in decimal form is \( 0.6\div100 = 0.006 \).

Step3: Calculate the premium

The loan amount is \$300,000. Substitute into the formula: \( P = 300000\times0.006= 1800 \).

Answer:

\$1,800