The total commission that will be paid during the two years is $ 225
Solution:
Given that insurance company pays its agents 40% commission on the first year’s premium and 5% on the second year’s premium for life insurance policies
The premiums are 500$ per year
Commission on first year:
40% commission on the first year’s premium
Thus 40 % commission on $ 500
[tex]\rightarrow 40 \% \text{ of } 500\\\\\rightarrow 40 \% \times 500\\\\\rightarrow \frac{40}{100} \times 500\\\\\rightarrow 200[/tex]
Thus commission paid for first year is $ 200
Commission on second year:
5 % commission on the second year’s premium
Thus 5 % commission on 500
[tex]\rightarrow 5 \% \text{ of } 500\\\\\rightarrow 5 \% \times 500\\\\\rightarrow \frac{5}{100} \times 500 = 25[/tex]
Thus commission paid for second year is $ 25
Total commission paid = $ 200 + $ 25 = 225
Thus Total commission paid is $ 225
