Question 6 • ****Spring 2026 Financial Math - MA2007 MQS21QXV
Five years ago, Benjamin invested in Parchar Special Effects. He purchased four par value $1,000 bonds from Parchar Special Effects at a market rate of 96.230. Each bond had an interest rate of 7.2%. Benjamin also purchased 200 shares of stock in the same company, each of which cost $19.08 and had a yearly dividend of $2.04. Today, bonds from Parchar Special Effects have a market rate of 104.595, and stock in Parchar Special Effects costs $22.62. If Benjamin liquidates his portfolio and sells all of his investments, which aspect of his investment will have yielded him a greater total profit, and how much greater is it?
Answer
A
The bonds yielded $940.20 more in profits than the stocks.
B
The bonds yielded $33.00 more in profits than the stocks.
C
The stocks yielded $373.20 more in profits than the bonds.
D
The stocks yielded $973.40 more in profits than the bonds.
Explanation
Each bond cost $962.30 and sells for $1,045.95, so the four bonds gain $334.60 in value. They also pay $1,440 in interest over five years (4 × $1,000 × 7.2% × 5), for a total bond profit of $1,774.60. The stocks gain $708 in value (200 × ($22.62 − $19.08)) and pay $2,040 in dividends (200 × $2.04 × 5), for a total stock profit of $2,748. The stocks yield $973.40 more, so the correct choice is D.
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