Question

What is brokerage in the context of share transactions?

Options

• The tax charged by the government on the face value of shares.

• The amount charged by a registered share broker for buying or selling shares on behalf of an investor.

• The annual dividend declared by a company to its shareholders.

• The difference between the face value and the market value of a share.

Answer 1

Brokerage is the amount charged by a registered share broker for buying or selling shares on behalf of an investor. It is always calculated on the Market Value (MV) of shares, i.e. \[ \text{Brokerage} = \frac{\text{Rate of brokerage}}{100} \times \text{Market Value} \]