Question

Sylvia is considering investing in one of two bond packages offered to her by different brokers. Broker U suggests that Sylvia buy two par value $1,000 bonds from Franklin County, three par value $500 bonds from Enam Telecom, and two par value $1,000 bonds from the city of Iligs.. Franklin County bonds are selling at 96.674, Enam Telecom bonds are selling at 109.330, and Iligs bonds are selling at 103.851. Broker V suggests that Sylvia buy four par value $500 bonds from Trochel Office Supplies, one par value $500 bond from Okaloosa county, and three par value $1,000 bonds from Globin Publishing. Bonds from Trochel Office Supplies are selling at 105.142, Okaloosa county bonds are selling at 85.990, and Globin Publishing bonds are selling at 97.063. If Broker U charges a commission of 2.8% of the market value of the bonds sold and Broker V charges a fee of $65 for each bond sold, which bond package will cost Sylvia less, and by how much?

Answer 1

Answer:

Broker U bond package will cost Silvia less and by $156.02

Explanation:

Answer 2

Answer:

broker U's package costs $156.02 less money than broker V's package

Explanation:

Broker U: 2.8% commission

• 2 par value bonds $1,000 x 96.674% = $1,933.48
• 3 par value bond $500 x 109.330% = $1,639.95
• 2 par value bonds $1,000 x 103.851% = $2,077.02

Silvia's total investment = ($1,933.48 + $1,639.95 + $2,077.02) x 1.028 = $5,808.66

Broker V: $65 per bond plus

• 4 par value bonds $500 x 105.142% = $2,102.84
• 1 par value bond $500 x 85.990% = $429.95
• 3 par value bonds $1,000 x 97.063% = $2,911.89

Silvia's total investment = $2,102.84 + $429.95 + $2,911.89 + (8 x $65) = $5,964.68

Broker V's offer - broker U's offer = $5,964.68 - $5,808.66 = $156.02