Dave and Eton are newly married and living in their first house. The yearly prem

Question

Dave and Eton are newly married and living in their first house. The yearly premium on their homeowner's insurance policy is $500 for the coverage they need. Their insurance company offer a 7 percent discount if toy install dead-bolt locks on al exterior doors. The couple can also receive a 4 percent discount 4 toy install smoke detectors on each floor. They have contacted a locksmith, who will provide and install dead-bolt locks on the two exterior doors for $78 each. At the local hardware store, smoke detectors cost $18 each, and the house has two floors. Dave and Ellen can install them themselves. How many years will it take Dave and Ellen to earn buck in discounts the cost of the dead-bolts? (Round your answer to 2 decimal places) How many years will it take Dave and Ellen to earn back in discounts the cost of the smoke detectors? (Round your answer to 2 decimal places). Would you recommend Dave and Ellen invest in the safety items, if they plan to stay in that house for about 5 years? No Yes

Explanation / Answer

a.

b.

c. NO

Recovery Period = Cost incurred / discount per year 156/35 4.46 Cost Incurred = 78*2 156 Discount per year = 500*0.07 35

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