Question

Some online discount brokerage firms charge commissions based on the transaction amount (principal). Suppose an investor purchases 25 shares of a stock at $51.05 per share. After 175 days the investor sells the stock for $55.17 per share. Using the commissions schedule below, find the annual rate of interest earned by this investment. (Use 360 days for a year.)

Commission Schedule

Principal Commission

$0-$1299, $10+1.8% principal

$1300-$4999, $15+0.9% principal

$5000+, $20+0.3% principal

Answer 1

Particulars	Buy	Sell
Value	1,276.25	1,379.25
Commission	32.97	(27.41)
Net	1,309.22	1,351.84
Less: cost		(1,309.22)
Gain on sale		42.61

Annual return = 42.61/1309.22 * 360/175 = 6.70%

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