Question

MSFT
BID		ASK
SHARES	PRICE	SHARES	PRICE
500	168.50	200	170.50
200	168.00	300	170.80
350	167.50	450	171.30
600	167.35	200	172.00
150	166.90	1,000	172.50

Above is the book for MSFT. You are planning to buy 300 shares of the MSFT stock at the market price. What will be your average purchasing price? What is the bid-ask spread after your purchase?

A. $170.60; $2.3

B. $170.60; $2.8

C. $170.68; $2.0

D. $170.68; $2.3

Answer 1

The ask price is the lowest price a seller of a stock is willing to accept for a share of that given stock.

For purchasing 1000 shares, we shall have to see first 300 shares at ask price for lowest price

200 shares at 170.5 = 200*170.5 = 34100

100 shares at 170.8 = 100*170.8 = 17080

Total = 34100 + 17080 = 51180

Average purchasing price = 51180 /300 = 170.60

A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market. The bid-ask spread is essentially the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept.

Bid ask spread =170.80 - 168.5 = 2.3

Answer A. $170.60; $2.3

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