A contractor's workers' compensation premium is $8,400 annually. If they qualify for a 15% safety discount, what is their adjusted premium?
Correct Answer
A) $7,140
$8,400 × (1 - 0.15) = $8,400 × 0.85 = $7,140.
Why This Is the Correct Answer
To apply a 15% discount, multiply the original premium by (1 − 0.15) = 0.85. $8,400 × 0.85 = $7,140. This is the adjusted annual premium after the safety discount is applied.
Why the Other Options Are Wrong
Option B: $7,770
$7,770 results from applying a 7.5% discount ($8,400 × 0.925), which is half the stated 15% discount. This is a common arithmetic error when candidates halve the discount rate by mistake.
Option C: $7,560
$7,560 results from applying a 10% discount ($8,400 × 0.90). This confuses a 10% reduction with the stated 15% safety discount.
Option D: $7,350
$7,350 results from applying a 12.5% discount ($8,400 × 0.875). This is another off-by-portion error and does not correspond to the 15% discount given in the question.
Memory Technique
Safety discount problems: keep what you pay = original × (1 − discount%). Here: keep 85% of $8,400. Think '85 cents on the dollar' — $8,400 × 0.85 = $7,140.
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