A full- service broker charges a commission rate of 2.2% of thetotal dollar value of...

A full- service broker charges a commission rate of 2.2% of the total dollar value of a stock transaction. A discount broker charges a transaction fee of $25 plus an additional five cents per share. Suppose you purchase 800 shares of Talisman Energy at $21.75 per share. What percentage of the commission fee charged by the full- service broker would you save by using the discount broker?

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Expert Solution

1. Charge by Full service broker charge = Total dollar Value * 2.20%

Charge by Full service broker charge = 21.75 * 800 * 2.20%

Charge by Full service broker charge = $382.80

2. Charge by Discount broker charge = 25 + 0.05 * Shares dealt

Charge by Discount broker charge = 25 + 0.05 * 800

Charge by Discount broker charge = $65

3. Commission saved = $382.80 - 65 = $317.80

% Saved = Commission Saved / full service broker charges

% Saved = 317.80 / 382.80

% Saved = 83.02%

jeff jeffy answered 2 years ago

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