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. if you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?

Answer 1

what are the choices?

Answer 2

Answer:

$30

Explanation:

First, you will pay the flat, $25 fee just for selling. Then, you have to take the difference between the bid price and ask price, called the bid-ask spread. So, $10.30 - $10.25 = $0.05. Since you are buying 100 shares, you need to multiply by 100, so, 0.05 *100 = $5. Adding these 2 numbers together though completes the question, $25 + $5 = $30.