Statistics for Business

4. Written Assignment

A stockbroker calls on potential clients from referrals. For each call, there is a 15% chance that the client will decide to invest with the firm. Sixty percent of those interested are not found to be qualified based on the brokerage firm’s screening criteria. The remaining are qualified. Of these, half will invest an average of $5,000, 25% will invest an average of $20,000, 15% will invest an average of $50,000, and the remainder will invest $100,000. The commission schedule is as follows:

Transaction Amount

Commission

Up to $25,000

$60 + 0.5% of the amount

Up to $25,000

$85 + 0.4% of the amount

$50,001 to $100,000

$135 + 0.3% of the amount

The broker keeps half the commission. Develop a spreadsheet to calculate the broker’s commission based on the number of calls per month made. Use data tables to show how the commission is a function of the number of calls made.