Question

Leona purchased a $1,000 bond having a quoted price of 99.875. She had to pay a 5.5% brokerage fee (of the selling price). What was the total cost of the bond (to the nearest whole cent)?

$943.82
$1,064.44
$534.77
$2,054.22
None of these choices are correct.

Answer 1

None of these choices are correct.

Explanation:

The quoted value of 99.875, means that this bond is sold at 99.875% of the face value and not at a price of $99.875.

Therefore, calculate price;

Price = 0.99875 * 1000

Price = $998.75

Since brokerage fees is 5.5% of the selling price, Leona will pay additional cost to the quoted price making the total cost to be more than $998.75;

Brokerage fees = (0.055*998.75) = $54.93

Total cost = $998.75 +$54.93

= $1053.68

Therefore, none of the choices is correct.