Which statement about calculating the total cost is correct?

Which statement about calculating the total cost is correct?

• A. The total cost equals price per share times number of shares plus trading fees.
• B. The total cost equals price per share plus number of shares.
• C. The total cost ignores trading fees.
• D. The total cost is always the price per share times the number of shares.

Answer: (A)

Total cost includes both the money spent on the shares and the trading costs charged by the broker. You first calculate the cost of the shares by multiplying price per share by the number of shares, then add any trading fees or commissions. For example, at $50 per share for 100 shares, the share cost is $5,000. If there are $5 in fees, the total cost is $5,005. This approach correctly accounts for all cash outlays. Adding the price per share to the number of shares, omitting fees, or assuming fees don’t exist would misstate the true amount you pay.

Total cost includes both the money spent on the shares and the trading costs charged by the broker. You first calculate the cost of the shares by multiplying price per share by the number of shares, then add any trading fees or commissions. For example, at $50 per share for 100 shares, the share cost is $5,000. If there are $5 in fees, the total cost is $5,005. This approach correctly accounts for all cash outlays. Adding the price per share to the number of shares, omitting fees, or assuming fees don’t exist would misstate the true amount you pay.