A Tier 3 contractor wants to bid on a $2.5 million project. The bonding requirement is 15% of contract value. What bond amount is required?
Correct Answer
A) $375,000
Bond amount = $2,500,000 × 15% = $375,000.
Why This Is the Correct Answer
$2,500,000 × 0.15 = $375,000. This is a straightforward percentage calculation. The bond protects the project owner by ensuring the contractor can financially back their performance obligations.
Why the Other Options Are Wrong
Option B: $450,000
$450,000 would result from applying an 18% rate ($2,500,000 × 0.18) rather than the stated 15%. No basis in the problem for this figure.
Option C: $325,000
$325,000 would result from applying a 13% rate ($2,500,000 × 0.13). This is a plausible distractor for candidates who misread or misremember the percentage.
Option D: $400,000
$400,000 would result from applying a 16% rate ($2,500,000 × 0.16). This is close to the correct answer and designed to trap candidates who calculate slightly off from the given percentage.
Memory Technique
Bond amount = Contract value × Bond percentage. Write it as a simple formula: B = V × %. Here: $2,500,000 × 15% = $375,000. Always convert the percentage to a decimal before multiplying.
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