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

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.

$\text{Broker P will charge}=\frac{8.50}{10} \times 500$

$\text{Broker P will charge}=8.50 \times 50$

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

Broker P will charge $ 425 for 500 shares.

Let us find commission for broker Q.  

$\text{Cost of buying Ergar Appliances share}=18.75 \times 500$

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

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.

$\text{Broker Q will charge}=65 \times 9.375$

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

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.

Answer 2

 broker p will charge 184.38 less than broker q