Final answer:
The student's question is about stock transactions, specifically understanding cost basis and net profit. It's demonstrated by calculating the net profit from buying and selling shares, factoring in the cost basis and transaction fees.
Step-by-step explanation:
The student's question involves calculating the adjusted cost basis and net profit from buying and selling stocks. If the original stock was bought at $11 and then sold at $7, we have an initial $4 loss on each share.
When adding a $5 cost to the cost basis (which could represent a fee or additional expense), the new cost basis would be $11 + $5 = $16 per share. As for profit calculation, if we consider Randy's example of 800 shares bought at $19.50 and sold at $34.50, the transaction costs must be factored in.
To calculate net profit, one must consider transaction costs and capital gain (or loss). In Randy's case, buying and selling fees are $10 each, which amounts to $20 in total fees.
The gross profit before fees is (800 shares x $34.50) - (800 shares x $19.50) = $27,600 - $15,600. Deducting the $20 fee gives a net profit of $27,580.