Question 15 • ****Spring 2026 Financial Math - MA2007 MQS21QXV
Josef owns four par value $1,000 bonds from Dowc Beverage Co. Each bond has a market value of 104.561 and gives 9.2% interest. Josef also owns 170 shares of stock in Dowc Beverage Co. Stock in Dowc Beverage Co. has a share price of 26.25 and pays a dividend of $2.38. If the broker Josef employed to purchase these stocks and bonds charges a commission of $72 for each ten shares of stock bought or sold and a commission of 4% of the market value of each bond bought or sold, which aspect of Josef’s investment in Dowc Beverage Co. has a greater percent yield, and how much greater is it?
Answer
A
The stocks have a yield 2.15 percentage points higher than that of the bonds.
B
The stocks have a yield 0.27 percentage points higher than that of the bonds.
C
The bonds have a yield 1.35 percentage points higher than that of the stocks.
D
The bonds have a yield 2.08 percentage points higher than that of the stocks.
Explanation
Each bond pays $92 annually (9.2% of $1,000). Its market price is $1,045.61, and adding the 4% commission gives an investment cost of about $1,087.43 per bond, for a yield of about 8.46%. Each share costs $26.25 plus a $7.20 commission ($72 per 10 shares), and pays $2.38 annually, for a yield of about 7.12%. The bonds’ yield is therefore about 1.35 percentage points higher, matching choice C.
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