Broker P will give Diana a better deal.
Further Explanation:
Brokerage commission:
The brokerage commission is charged by the broker on the sales value of the securities sold on the behalf of the owner of the security. Generally, the commission is a fraction of the total sales value or charged at a flat rate. The broker helps the holder of the security in selling the goods and charges a commission for the services.
Calculate the Broker P’s commission:
[tex]$\begin{aligned}\text{P's Commission}&=\left[\text{Market value rate}\times{\text{Par value}}\right]\times{\text{Commission rate}}\\&=[104.682\%\times{\$1,000}]\times{4.4\%}\\&=46.06\end{aligned}$[/tex]
The Broker’s P’s commission is $46.06.
Decision regarding the selection of the broker:
The Broker P’s commission for each bond is $46.06 and the commission of Broker Q is $32.50 per bond. The commission of broker Q is lower by $13.56 [tex]$(\$46.06-\$32.50)$[/tex]. Therefore, Diana should choose broker Q as it is charging less commission.
Thus, Broker P will give Diana a better deal.
Learn more:
Answer details:
Grade: High school
Subject: Accounting
Chapter: Securities
Keywords: Diana, broker, purchase, par, value, corporate, bond, Deegan, Pharmaceuticals, commission, market, value, bond, purchased, Broker, flat fee, bond, purchased, bonds, Deegan, Pharmaceuticals, selling, broker.
Answer:
Broker Q’s commission will be $13.56 less than Broker P’s.
So C
