An insurer calculates a motor‑insurance premium as follows: base premium = 12% of the insured value $V$; administrative loading = 8% of the base premium; a 5% discount is given on the total (base + loading) for a no‑claim year; finally a 2.5% government tax is applied on the discounted amount.
(a) Find the final premium payable for a car valued at $\text{₦}2{,}500{,}000$.
(b) If the insurer wants the final premium to be exactly $\text{₦}400{,}000$ while keeping the same rates and discount, what should be the minimum insured value?

Question

An insurer calculates a motor‑insurance premium as follows: base premium = 12% of the insured value $V$; administrative loading = 8% of the base premium; a 5% discount is given on the total (base + loading) for a no‑claim year; finally a 2.5% government tax is applied on the discounted amount. 
(a) Find the final premium payable for a car valued at $\text{₦}2{,}500{,}000$. 
(b) If the insurer wants the final premium to be exactly $\text{₦}400{,}000$ while keeping the same rates and discount, what should be the minimum insured value?

Accepted Answer

≈₦3,170,000 (minimum insured value)

Neco 2018 Commerce Question 32

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