A house is closed on October 15. The annual insurance payment is $578 for the fiscal year of July 1 to June 30. The buyers will assume the seller's policy. Since the policy has been paid, how much does the buyer owe the seller at closing?

1. 167.86
2. 410.14
3. 408.56
4. 169.44

2. 410.14

Explanation:

Let's start with the annual insurance payment of $578 and divide it buy 365 days, to get the daily fee.

So, it's $578 / 365-days = $1.5836 per day

The Seller of the house paid the policy for 259 days.

The Seller however, did not own the policy (from the 15th of October through to 30th of June) 259 days left x $1.5836 = $410.14