Question

Broker P charges a commission of $8.50 for every ten shares of stock, and Broker Q charges a fee of $65.00 for every thousand dollars bought or sold. If stock in Ergar Appliances costs $18.75 per share and you buy 500 shares, which broker is the better deal, and by how much?

Answer 1

broker p will charge 184.38 less than broker q

Answer 2

We have been given that Broker P charges a commission of $8.50 for every ten shares of stock, and Broker Q charges a fee of $65.00 for every thousand dollars bought or sold.

Let us find commission of each broker to buy 500 shares.

`\text{Broker P will charge}=(8.50)/(10) * 500`

`\text{Broker P will charge}=8.50 * 50`

`\text{Broker P will charge}=425`

Broker P will charge $ 425 for 500 shares.

Let us find commission for broker Q.

`\text{Cost of buying Ergar Appliances share}=18.75 * 500`

`\text{Cost of buying Ergar Appliances share}=9375`

We are told that Broker Q charges a fee of $65.00 for every thousand dollars bought or sold. 9375 is same as 9.375 thousands.

To find broker Q's commission we will multiply 9.375 by 65.

`\text{Broker Q will charge}=65 * 9.375`

`\text{Broker Q will charge}=609.375`

We can see that broker Q is charging more than broker P. Let us find difference of commissions of both brokers.

`609.375-425=184.375`

Therefore, Broker P is the better deal by $184.375.