Total Commissions per Product of RetailBankingCo

Question

Total Commissions per Product of RetailBankingCo

Total comm. per product RetailBankingCo = $4 + $80 × 5% × 3 = $16 < $80

If it is per product why is it multiplied by 3

And why is it multiplied by 3, not 4?

Answer 1

Hi there,

Basically, you need to multiply by the average lifetime of a product, which is 3 years, not 4.

Best,
Cristian

Answer 2

Hi there,

Thank you very much for this question. I would be happy to share the solution to it:

In section “Background”, it is stated "The average lifetime of these four products is three years.”
As such, given that the trailing commission is by definition paid on a yearly basis, one needs to multiply the trailing commission by 3.

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Answer 3

Hi there,

Great question! Hagen has already answered, but make sure to read all sections of a case to better understand. Additionally, these are the types of “tricks” that are common in cases so the interviewer can check that you are thinking rationally about things (even if you have not “learned” that exact thing)