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If a brokerage firm charged a commission of 2% of the total dollar amount...

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If a brokerage firm charged a commission of 2% of the total dollar amount...

by BTGmoderatorLU » Tue Apr 07, 2020 2:10 am

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Source: Manhattan Prep

If a brokerage firm charged a commission of 2% of the total dollar amount of a certain trade, what was the total amount of that trade?

1) The dollar amount of the trade minus the brokerage firm's commission was $88000.
2) The brokerage firm's commission decreased the profit earned on the trade by 20%.

The OA is A
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Source: — Data Sufficiency |
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Re: If a brokerage firm charged a commission of 2% of the total dollar amount...

by deloitte247 » Sun Apr 12, 2020 10:10 am

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Let the total dollar amount = t
Let commission fee = c
c = 2% of t = 0.02t
So, what was the total amount of that trade?
i.e what is t?

Statement 1: The dollar amount of the trade minus the brokerage firm's commission was $88000.
i.e t - c = $88000
From the question stem; c = 0.02t
Therefore, t - 0.02t = $88000
0.98t = $88000
t = $88000 / 0.98 = $89795.92
Hence, statement 1 is SUFFICIENT.

Statement 2: The brokerage firm's commission decreased the profit earned on the trade by 20%.
Profit = selling price - cost price
Where the seller price = t
Profit decreased by 20%; remaining profit = 100 - 20 = 80%
Therefore, 80% of profit = t - cost price
The profit was decreased by the commission.
Therefore, 80% of profit = t - cost price - c
From the question stem; c = 0.02t
80% of profit = t - 0.02t - cost price
80% of profit = 0.98t - cost price
There is no information regarding the cost price, so the target question cannot be answered. Hence, statement 2 is NOT SUFFICIENT.

Therefore, since statement 1 alone is SUFFICIENT, then the correct option is A.
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