Suppose that an investor places two separate orders of buying common stock of XYZ Ltd: First order is of buying 2,000 shares and the second order is of buying 6,000 shares. Each purchase is made at price of $10.1.
The brokerage commission charged is: $50+1% of the value of the transaction if the value of the transaction is equal or less than $25,000 and the brokerage commission is $40+1% of the value of the transaction if the value of the transaction is between $25,000 and $100,000.
Assume now that he/she places one block order of buying 10,000 shares and due to block order, the brokerage commission will be only 0.2% of the value of the transaction.
Find saving in brokerage commission due to the block order to purchase.