California Real Estate Practice Exam

What is the monthly impound account payment for fire insurance for the following? Insured value = $100,000; Rate = $0.40 per $100; 3 yr. premium = 2.5 times annual rate.

1. $25.78

2. $26.78

3. $27.78

4. $28.78

The correct answer is: $25.78

To determine the monthly impound account payment for fire insurance, you need to follow a few steps to calculate the annual fire insurance premium based on the given insured value and rate, then determine the total premium over three years, and finally, find the monthly payment amount. 1. **Calculate the annual premium:** The rate for fire insurance is given as $0.40 per $100 of insured value. First, find how many hundreds are in the insured value of $100,000: \[ \text{Hundreds} = \frac{100,000}{100} = 1,000 \] Next, multiply the number of hundreds by the rate: \[ \text{Annual Premium} = 1,000 \times 0.40 = 400 \] 2. **Calculate the three-year premium:** The three-year premium is calculated as 2.5 times the annual premium: \[ \text{Three-Year Premium} = 2.5 \times 400 = 1,000 \] 3. **Calculate the monthly payment:** To find the monthly impound account payment, divide the three-year premium by the