Question

You find that the bid and ask prices for a stock are $10.25 and $10.35, respectively. If you purchase or sell the stock, you must pay a flat commission of $20. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?

		$25
		$30
		$55
		$50

Answer 1

Correct answer: $50

Bid price = $10.25

Ask price = $10.35

Bid-Ask spread = 10.35-10.25 = $0.10 per share

We can also call Bid-Ask spread as implied cost of share trade.

No. of shares traded = 100

Flat commission per trade (buy or sell) = $20

Thus,

Total implied and actual transaction cost would be:

answered by: anonymous