Answer: Your savings per year will be $72
Explanation: For an insurance premium, premiums are by standard, paid once every month. Hence an insurance policy with an annual premium of $1200 would result in a monthly premium payment of;
Monthly Premium = 1200 / 12
Monthly Premium = 100
However, there is an option to pay all $1200 at once, that is, one lump sum just once in the entire 12-month period and taking that option would offer a discount on the insurance premium which is given as 6% and this is calculated as shown;
Premium = 1200
Discount = 0.06 (6 %)
Discount calculated = 1200 * 0.06
Discount calculated = 72
The calculations and result shows that the option of paying the premium at once would result in a savings of $72 per year.
