Question

The bid-ask spread exists because of _______________. A. market inefficiencies B. discontinuities in the markets C. the need for dealers to cover expenses and make a profit D. lack of trading in thin markets

Answer 1

Answer:

C. the need for dealers to cover expenses and make a profit

Explanation:

In the market for securities there are two pricing of securities.

The ask price is the price at which the buyer is willing to purchase a security.

The ask price or the offer price is price at which the seller of a security is willing to sell it. Ask price can be firm or negotiable.

Bid ask spread is the difference between the highest amount a buyer is willing to buy a security and the lowest price at which a seller is willing to sell it.

This spread exists because dealers need to cover expenses and make a profit