Final answer:
Brokerage firms typically charged a minimum commission fee ranging from $5 to $10 for stock transactions, but nowadays, many offer lower or no fees. When calculating profit, commissions must be deducted from the gross profit to find the net profit.
None option is correct
Step-by-step explanation:
When purchasing or selling stocks, brokerage firms typically charge a commission fee for their services. Historically, the minimum commission charge by brokerage firms was within the range of $5 and $10. Nowadays, many online brokerages offer low or even no commission fees for stock trades.
However, for firms that do charge, it is essential to factor in these transaction costs when calculating profit from stock trade activities.
For instance, if Randy purchased 800 shares of stock at $19.50 per share and sold them at $34.50 per share, he would need to consider the brokerage firm's commission fees for both buying and selling the stocks to calculate the net profit.
If we assume the brokerage charges $10 per transaction, Randy's gross profit from selling the stocks would be $27,600 ($34.50 - $19.50 = $15 * 800 shares), and after subtracting the total commission fees of $20 ($10 for buying and $10 for selling), Randy's net profit would be $11,980.
None option is correct