Question : Case Study 84
DEF Ltd. is a well-established company planning to raise funds for its expansion projects. The company's management is considering the selection of a broker.
Question :
What type of broker provides trading services at a lower cost but offers limited advice?
Option 1: Full-service broker
Option 2: Discount broker
Option 3: Floor broker
Option 4: Specialist broker
Correct Answer: Discount broker
Solution : The correct answer is (b) Discount broker
A discount broker is a type of broker that provides trading services at a lower cost but offers limited advice compared to a full-service broker. Discount brokers typically charge lower commissions or fees for executing trades but may not provide extensive research, investment advice, or personalized services to the same extent as full-service brokers. Investors who prefer a lower-cost approach and are comfortable making their own investment decisions often opt for discount brokers.
What is the main role of a broker in the stock market?
Option 1: Regulating stock exchanges
Option 2: Issuing new shares
Option 3: Matching buy and sell orders
Option 4: Allocating resources to companies
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