Fire Insurance

T.J. bought fire insurance for his pizza shop for $200,000 at an annual rate per $100 of $.49. At the end of 10 months, T.J. canceled the policy since his pizza shop went out of business. Determine the refund to T.J.

A. $980
B. $852.60
C. $127.40
D. $186.20

I did 200,000/100 = 2,000 x 0.49= 980 x 10 months= 9,800.

9,800 isn't one of my answers however 980 is.

Can someone please help me with this?

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  1. If the insurance premium is properly prorated without any penalties ....
    annual payment = 200000/100(.49) = $980
    you used 10/12 of that or 980(10/12) = 816.67

    refund should be 980 - 816.67 = $163.33
    none of your answer choices match that.

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  2. Thank you for your help.

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