Calculate the lien agent fee for a North Carolina construction project with a total contract value of $2,850,000. The fee structure is 0.10% of the first $1,000,000 and 0.05% of the remaining amount.
Correct Answer
D) $1,925
First $1,000,000 × 0.10% = $1,000. Remaining $1,850,000 × 0.05% = $925. Total = $1,000 + $925 = $1,925.
Why This Is the Correct Answer
The correct answer is D ($1,925). The tiered fee structure applies as follows: the first $1,000,000 × 0.10% = $1,000; the remaining $1,850,000 ($2,850,000 − $1,000,000) × 0.05% = $925. Total fee = $1,000 + $925 = $1,925.
Why the Other Options Are Wrong
Option A: $2,425
$2,425 is incorrect. This figure appears to result from applying 0.10% to the full $2,850,000 ($2,850) minus an incorrect adjustment, or from miscalculating the remaining balance. The tiered structure must be applied correctly with 0.10% only on the first million.
Option B: $3,425
$3,425 is incorrect. This may result from applying 0.10% to the entire $2,850,000 without using the tiered structure, or from adding an incorrect extra amount. Applying a flat 0.10% to the full contract value ignores the lower rate for amounts above $1,000,000.
Option C: $2,925
$2,925 is incorrect. This could result from applying 0.10% to the first $1,000,000 ($1,000) and then incorrectly applying 0.10% (instead of 0.05%) to only a portion of the remaining amount, or from some other arithmetic error. The correct rate for amounts above $1,000,000 is 0.05%, not 0.10%.
Memory Technique
Think '10 for the first million, 5 for the rest'—the rate halves after the first million. For $2.85M: first million = $1,000 (10 cents per thousand), remaining $1.85M = $925 (5 cents per thousand). Add them: $1,925.
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