Greg just purchased a house for $450,000. His annual homeowners insurance premium is $0.42 per $100 of value. If his annual premium is divided into equal monthly payments, what will Greg have to pay on a monthly basis to keep his home insured?

Question

a.
$1,890.00
b.
$157.50
c.
$1,575.00
d.
$131.25

Answer 1

To calculate Greg's monthly homeowners insurance premium, we first need to determine the annual insurance premium based on the home's value and the given rate.

1. Find the annual premium:

   • The home value is $450,000.
   • The rate is $0.42 per $100 of value.
   • We convert the home value into "per $100" units: \[ \text{Home value in units of 100} = \frac{450,000}{100} = 4,500 \]

2. Calculate the annual premium: \[ \text{Annual premium} = 4,500 \times 0.42 = 1,890 \]

3. Convert the annual premium to a monthly premium: \[ \text{Monthly premium} = \frac{1,890}{12} = 157.50 \]

Therefore, Greg will have to pay $157.50 on a monthly basis to keep his home insured.

The answer is b. $157.50.