Question

Pierce wishes to purchase a municipal bond with a par value of $500 from Arapahoe County, and he is trying to decide which broker he should employ to purchase the bond. Broker A charges a 3.1% commission on the market value of each bond sold. Broker B charges a flat $24 for each bond sold. If the bond has a market rate of 88.754, which broker will give Pierce the better deal, and by how much?

Answer 1

D - Broker A’s commission will be $10.24 less than Broker B’s.

Answer 2

Since the given problem statement and data is

Manicipal bond with par value=$500

commission rate =3.1%

charges of broker B=$24

bond market rate=$88.754

hence from the given data Broker A charges a 3.1% commission on the market value of each bond sold is a better deal.