A bond premium is quoted at 0.8 percent of a $2,450,000 contract. What premium should be carried?
Correct Answer
D) $19,600
The premium is $2,450,000 x 0.008 = $19,600. Other choices move the decimal or apply the percentage to the wrong base.
Why This Is the Correct Answer
The premium is $2,450,000 x 0.008 = $19,600. Other choices move the decimal or apply the percentage to the wrong base.
Why the Other Options Are Wrong
Option A: $1,960
payment bond premium, choice a: $1,960 omits a required add-on/subtraction; the numeric gap is $17,640.
Option B: $9,800
payment bond premium, choice b: $9,800 backs into 9,879.03 when divided by 0.99; the accepted setup gives 19,758.06 on that same base.
Option C: $196,000
payment bond premium, choice d: $196,000 adds an extra unstated add-on/subtraction; the numeric gap is $176,400.
Memory Technique
Store payment bond premium with its last math move; nearby answers are usually unfinished versions of $19,600.
Reference Hint
Open NASCLA Contractors Guide to Business, Law and Project Management, 14th Ed.; use the index entry or section for "Bond premium estimating" to confirm that The premium is $2,450,000 x 0.008 = $19,600.
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