Question

You find that the bid and ask prices for a stock are $12.65 and $13.40, respectively. If you purchase or sell the stock, you must pay a flat commission of $30. If you buy 300 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?
a. $15
b. $180
c. $165
d. $30

Answer 1

Answer:

$165

Explanation:

When transacting on shares the bid is the price at which you buy shares, while the ask is the price at which you sell shares.

Bid= $12.65

Ask= $13.40

Also remember when buying or selling shares there is a flat commission of $30

So when buying shares = (12.65 * 300) + commission

= (12.65*300) + 30= 3,825

When selling shares = (13.4* 300)-30

= 3,990

Thus net cost= Cost of selling - Cost of buying

= 3,990 - 3,825

= $165