diana is trying to choose a broker who will help her purchase a par value $1,000 corporate bond from deegan…

diana is trying to choose a broker who will help her purchase a par value $1,000 corporate bond from deegan pharmaceuticals. broker p charges a commission of 4.4% of the market value of each bond purchased, and broker q charges a flat fee of $32.50 for each bond purchased. if bonds from deegan pharmaceuticals are selling at 104.682, which broker will give diana the better deal, and by how much? a. broker ps commission will be $9.47 less than broker qs. b. broker ps commission will be $27.89 less than broker qs. c. broker qs commission will be $13.56 less than broker ps. d. broker qs commission will be $11.50 less than broker ps.

diana is trying to choose a broker who will help her purchase a par value $1,000 corporate bond from deegan pharmaceuticals. broker p charges a commission of 4.4% of the market value of each bond purchased, and broker q charges a flat fee of $32.50 for each bond purchased. if bonds from deegan pharmaceuticals are selling at 104.682, which broker will give diana the better deal, and by how much? a. broker ps commission will be $9.47 less than broker qs. b. broker ps commission will be $27.89 less than broker qs. c. broker qs commission will be $13.56 less than broker ps. d. broker qs commission will be $11.50 less than broker ps.

Answer

Explanation:

Step1: Calculate the market value of the bond

The bond is selling at 104.682% of its par - value. The par - value is $1000, so the market value $M = 1000\times1.04682=$1046.82$.

Step2: Calculate Broker P's commission

Broker P charges a 4.4% commission on the market value. So, the commission of Broker P, $C_P=0.044\times1046.82 = 46.06008\approx$46.06$.

Step3: Identify Broker Q's commission

Broker Q charges a flat - fee of $C_Q = $32.50$.

Step4: Calculate the difference in commissions

The difference $\Delta C=C_P - C_Q=46.06−32.50=$13.56$. Since $C_P>C_Q$, Broker Q's commission is less than Broker P's commission by $13.56$.

Answer:

c. Broker Q's commission will be $13.56 less than Broker P's.