Question

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 on each trade. If you buy 100 shares of the stock and immediately sell them, what is your total transaction cost in dollars?

Answer 1

Answer:

The total transaction cost is $55.

Explanation:

Total cost = number of shares * (Ask price - Bid price) + purchase cost + sell cost

                 = 100×(10.30 - 10.25) + 25 + 25

                = $55

Therefore, the total transaction cost is $55.