Question 283803
man insures building for $10,000 at annual rate of 1 and 1/2 percent per year.


That's 1.5% divided by 100% = a rate of .015 per year.


This means he would be paying .015*10000 = 150 per year.


He pays $1250 for a sprinkler.


Insurance company reduces the rate on his property to 1/4% per year.


That's .25% divided by 100% = a rate of .0025 per year.


This means he would be paying .0025*10000 = 25 per year.


The difference in what he would be paying per year would be 150 - 25 = 125 a year.


In other words, he would be saving 125 per year on the insurance rates he is paying because he bought the sprinkler.


1250 / 125 = 10.


He will make his money back in 10 years.