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• #9904

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

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• Tipeni bought 100 shares in a bank for $35.60 each. He sold them two years later for$48.90 and paid a brokerage fee of $32. a. What is the profit made on these shares? b. What is the profit as a percentage of the cost of the shares? c. What is the profit as a percentage of the cost of the shares? a. Total cost = 100 ×$35.60 + $32 =$3592

Sales = 100 × $48.90 –$32 (don’t forget that the brokerage fee will reduce the sales earnings, so it is subtracted, not added)
= $4858 b. Profit =$4858 – $3592 =$1266
(working this out on the assumption that the brokerage fee is charged on both the purchase and the sale)

c. Profit percentage = $$\frac{1266}{3560}\times 100$$
= 35.6%

• Cooper bought 2500 shares for $5.60 each. a. Cooper is charged a brokerage fee of 6.2 cents per share. What is the total cost of purchasing the shares? b. Two months later a dividend of 36 cents per share was paid. What was the total dividend Cooper received? c. Cooper sold the shares after receiving the dividend for$5.75. He was charged a brokerage fee of 6.2 cents per share. What was the profit on these shares?

a. Cost = 2500 × $5.60 + 2500 × 0.062 =$14155

b. Dividend = 2500 × 0.36
= $900 c. Sales = 2500 × 5.75 – 2500 × 0.062 =$14220
Profit = $14220 +$900 – $14155 =$965

(worked out assuming the want the total profit, including the first dividend received)