Neco 2021 Commerce Question 48

Practice objective / multiple choice question 48 from the 2021 Neco Commerce examination.

Neco 2021 Commerce Objective / Multiple Choice Medium Difficulty
Question 48 NECO • 2021 • COMMERCE • objective

An insurance company offers fire insurance on a warehouse valued at ₦12,000,000. The actuarial loss expectancy is \(0.4\%\) of the insured value per year. The company adds a loading of \(18\%\) to cover administrative expenses and profit, and then applies a \(5\%\) tax on the gross premium. If the final premium charged to the client is ₦180,000, determine the percentage loading (as a proportion of the pure premium) that the company actually applied, and compute the pure premium amount.

Answer Options

Correct Answer A. Loading applied ≈ 257.14\% (i.e., 2.5714 times the pure premium); pure premium = ₦48,000
B. Loading applied ≈ 200.00\% (i.e., 2.00 times the pure premium); pure premium = ₦48,000
C. Loading applied ≈ 300.00\% (i.e., 3.00 times the pure premium); pure premium = ₦60,000
D. Loading applied ≈ 257.14\% (i.e., 2.5714 times the pure premium); pure premium = ₦45,000
Correct Answer
A
Correct Option:
Loading applied ≈ 257.14\% (i.e., 2.5714 times the pure premium); pure premium = ₦48,000

About This Question

This is Neco 2021 Commerce Question 48. It is one of the objective questions from the 2021 Neco Commerce examination.

Difficulty level: Medium .

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