Asked by Aleczander Bagensie on Jul 12, 2024
Verified
You find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. If you purchase or sell the stock, you must pay a flat commission of $25. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?
A) $50
B) $25
C) $30
D) $55
Bid and Ask Prices
The prices at which buyers are willing to buy (bid) and sellers are willing to sell (ask) a security or asset in the market.
Transaction Cost
Any expenses incurred when buying or selling securities, including broker's fees, taxes, and other charges that can impact the investor's net returns.
Commission
The fee paid to a broker or agent for conducting a transaction, typically a percentage of the transaction value.
- Gain an understanding of stock trading mechanics, detailing the responsibilities and strategies of specialists along with the notions of bid and ask prices.
- Acquire knowledge on the bid-ask spread and its elements, alongside the determinants affecting its magnitude.
Verified Answer
JR
Learning Objectives
- Gain an understanding of stock trading mechanics, detailing the responsibilities and strategies of specialists along with the notions of bid and ask prices.
- Acquire knowledge on the bid-ask spread and its elements, alongside the determinants affecting its magnitude.