Answer :
To determine how much of the premium is unearned as of May 1, let's break the problem down into steps:
1. Understand the policy duration and premium:
- The insurance policy is for six months, starting on February 1.
- The total premium for this period is [tex]$360. 2. Determine the monthly premium: - Divide the total premium by the number of months to find the monthly premium. \[ \text{Monthly Premium} = \frac{\text{Total Premium}}{\text{Policy Duration}} = \frac{360}{6} = 60 \text{ dollars per month} \] 3. Calculate the number of months from the policy start to May 1: - February 1 to March 1 = 1 month - March 1 to April 1 = 1 month - April 1 to May 1 = 1 month So, the period from February 1 to May 1 is 3 months. 4. Calculate the earned premium by May 1: - Multiply the number of months by the monthly premium. \[ \text{Earned Premium} = \text{Number of Months} \times \text{Monthly Premium} = 3 \times 60 = 180 \text{ dollars} \] 5. Determine the unearned premium by subtracting the earned premium from the total premium: \[ \text{Unearned Premium} = \text{Total Premium} - \text{Earned Premium} = 360 - 180 = 180 \text{ dollars} \] Thus, the premium that remains unearned as of May 1 is $[/tex]180.
The correct answer is:
C) $180
1. Understand the policy duration and premium:
- The insurance policy is for six months, starting on February 1.
- The total premium for this period is [tex]$360. 2. Determine the monthly premium: - Divide the total premium by the number of months to find the monthly premium. \[ \text{Monthly Premium} = \frac{\text{Total Premium}}{\text{Policy Duration}} = \frac{360}{6} = 60 \text{ dollars per month} \] 3. Calculate the number of months from the policy start to May 1: - February 1 to March 1 = 1 month - March 1 to April 1 = 1 month - April 1 to May 1 = 1 month So, the period from February 1 to May 1 is 3 months. 4. Calculate the earned premium by May 1: - Multiply the number of months by the monthly premium. \[ \text{Earned Premium} = \text{Number of Months} \times \text{Monthly Premium} = 3 \times 60 = 180 \text{ dollars} \] 5. Determine the unearned premium by subtracting the earned premium from the total premium: \[ \text{Unearned Premium} = \text{Total Premium} - \text{Earned Premium} = 360 - 180 = 180 \text{ dollars} \] Thus, the premium that remains unearned as of May 1 is $[/tex]180.
The correct answer is:
C) $180
