John bought 500 shares at $21.50 each. His broker charges 2% on the first $5000 of transactions and then 1% on any thereafter. What would it cost John to buy these shares?
Cost of shares = 500 × $21.50 = $10,750
Brokerage fee on first $5000
$5000 × 2%
= $100
Remaining purchase price = $10,750 – $5,000 = $5750
so the 1% is charged on $5750
Brokerage fee on remaining$5750
$5750 × 1%
= $57.50
total cost to buy shares = cost + fees
= $10,750 + $100 +$57.50
= $10,907.50