Problem 8-11 (LO8.2)

Dave and Ellen are newly married and living in their first house. The yearly premium on their homeowners insurance policy is $450 for the coverage they need. Their insurance company offers a 5 percent discount if they install dead-bolt locks on all exterior doors. The couple can also receive a 2 percent discount if they 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 $50 each. At the local hardware store, smoke detectors cost $7 each, and the new house has two floors. Dave and Ellen can install them themselves.

a.	How many years will it take Dave and Ellen to earn back in discounts the cost of the dead-bolts? (Round your answer to 2 decimal places.)

Recovery period

years

b.	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.)

Recovery period

years

c.

Would you recommend Dave and Ellen invest in the safety items, if they plan to stay in that house for about 5 years?

	Yes
	No