Mathematics Standard • Year 12 • Investment and Loans • Lesson 15
Brokerage and Total Cost, Skill Drill
Build fluency in the two brokerage rules and the sign that flips between buying and selling. Every question here is one step; the round trip comes in worksheet 2.
1. Quick recall
Answer in the space provided. 1 mark each
Q1.1 Write the rule for the total cost of BUYING shares.
Q1.2 Write the rule for the net proceeds of SELLING shares.
Q1.3 "The greater of $29.95 or 0.10%" means you should do what, exactly?
Q1.4 How many times is brokerage paid on a buy followed by a sell?
2. A flat fee
2 marks
Q2.1 Buy 400 shares at $15.50 with a flat brokerage of $19.95. Find the total cost.
3. The greater of two rules
Brokerage is the greater of $29.95 or 0.10% of the trade value. Say which rule applies each time. 2 marks each
Q3.1 A trade of $60,000.
Q3.2 A trade of $12,000.
4. Selling
2 marks
Q4.1 Sell $5000 of shares with a flat brokerage of $19.95. Find the net proceeds, and say what changes from the buying rule.
How did this worksheet feel?
What I'll revisit before next class:
Q1.1 to Q1.4
Buying: total cost = trade value + brokerage. Selling: net proceeds = trade value − brokerage. "The greater of" means work out both figures and take the larger. Brokerage is paid twice on a round trip, once each way.
Q2.1
Trade value = 400 × $15.50 = $6200.00 [1]. Total cost = $6200.00 + $19.95 = $6219.95 [1].
Q3.1
0.10% of $60,000 = $60.00, which is greater than $29.95, so the percentage applies [1]. Brokerage = $60.00 [1]. The trade is above the $29,950 break-even, which predicts this before any arithmetic.
Q3.2
0.10% of $12,000 = $12.00, which is less than $29.95, so the flat fee applies [1]. Brokerage = $29.95 [1].
Q4.1
Net proceeds = $5000.00 − $19.95 = $4980.05 [1]. The fee is subtracted rather than added, because it always costs you: on a purchase that means paying more, on a sale it means receiving less [1].