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?

a. Q will charge $375.35 less than Broker P.
b. Q will charge $160.22 less than Broker P.
c. P will charge $184.38 less than Broker Q.
d. P will charge $425.00 less than Broker Q.

Answer 1

Broker P is the better deal when buying 500 shares of stock at $18.75 per share, as they will charge $184.38 less than Broker Q. Option number C is correct.

Step-by-step explanation:

To determine which broker is the better deal when buying 500 shares of stock in Ergar Appliances at $18.75 per share, we need to calculate the total cost including the commission or fee for each broker.

For Broker P, who charges $8.50 for every ten shares:

• The number of 10-share groups in 500 shares is 500 / 10 = 50.
• Total commission for Broker P = 50 * $8.50 = $425.

For Broker Q, who charges $65.00 for every thousand dollars:

• Total cost of 500 shares = 500 * $18.75 = $9,375.
• Total fee for Broker Q = ($9,375 / $1,000) * $65 = $609.375 (since we only consider complete thousands, it's rounded down to $609.38).

Now, let's compare the costs:

• Difference = Broker P's commission - Broker Q's fee = $425 - $609.38 = -$184.38.

Therefore, Broker P will charge $184.38 less than Broker Q, making Broker P the better deal.