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

Answer:

None of these choices are correct.

Step-by-step explanation:

If a bond is quoted at 99.875, it means that it is sold at 99.875%  of the face value;

Face value = 1000

Therefore, Price = 0.99875 * 1000

Price = $998.75

If Leona pays  5.5% of the selling price, it means that she is paying additional cost which will make the total cost more than the quoted price;

5.5% of 998.75 is;

0.055*998.75 = $54.93

The total cost = $998.75 +$54.93

= $1053.68

Therefore, none of the given choices is correct.

Answer 2

Answer:

None of these choices are correct.

The total price of the $1000 bond is $105.37 (rounded to nearest cent)

Explanation:

Give the selling price of a $1000 bond =   $99.875

According to question, Brokerage fee = 5.5% of $99.875

$5.5 \% \text { of } \ 99.875=\frac{5.5}{100} \times 99.875=\ 5.493$

Total Cost of the bond is calculated by the formula,  

Total Cost = The selling Price + Brokerage Fee

Total Cost = $99.875 + $5.493

Therefore Total cost =$ 105.368

or, the total price of the $1000 bond is $105.37 (rounded to nearest cent)