Question

Diana is trying to choose a broker who help her purchase a par value $1000 corporate bond from Dedham Pharmaceuticals.Broker p charges a commission of 4.4% of the market value of each bond purchased and broker q charges a flat fee fee of $32.50 for each bond purchased.If bonds at Deegan pharmaceuticals are selling at 104.682 which broker will give Diana the better deal and by how much?

Answer 1

Broker Q’s commission will be $13.56 less than Broker P’s

Explanation:

Answer 2

Broker Q will give Diana the better deal by $13.56.

Explanation:

Diana wants to purchase a par value $1000 corporate bond. Broker P charges 4.4% of the market value, so the commission would be $46.06008 per bond. On the other hand, Broker Q would only charge $32.50 for each bond; due to this, the difference would be $13.56 in favor of Broker Q.