In the reservation savings calculation example, what is the amortized hourly rate?

• A. 0.073
• B. 0.050
• C. 0.100
• D. 0.125

Answer: (A)

Amortized hourly rate combines the upfront reservation cost spread evenly over the term with the hourly RI charge. To calculate it, take the upfront cost and divide by the total hours in the reservation term, then add the RI’s discounted hourly rate. In the example, using a 1-year term (8760 hours) and an upfront cost that yields about 0.0228 per hour plus a discounted RI hourly price of 0.050 results in 0.0228 + 0.050 ≈ 0.0728, which rounds to 0.073. This is the effective hourly cost of the reservation, hence the correct answer. The other values would represent only the discounted hourly rate (0.050) or would be inconsistent with the amortization step (0.100, 0.125).