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Andrews [41]
3 years ago
7

A dealer buys 10,000 shares of ABC common at $20 for its inventory. One week later the stock is quoted at $22 - $23, and a custo

mer sells 100 shares to the dealer at a net price of $21. Under the FINRA 5% Policy, a fair and reasonable mark-down is based upon which price?
Business
1 answer:
VashaNatasha [74]3 years ago
6 0

Answer:

$22

Explanation:

According to the FINRA 5% Policy the mark-down if the customer sell must always be calculated from the inside bid price which is here $22 and if the customer is a buyer then the mark-up must be calculated using the inside ask price which is here $23. As the customer here is seller, hence the inside bid price $22 was appropriate here according to the FINRA 5% policy.

FINRA 5% policy says that the broker can not charge commissions, or markups or markdowns which is more than 5% on standard trades.

So the commission of $2 ($23-$21) is not allowed under this rule hence the appropriate price for the stock must be $22 not $21.

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