Final answer:
The difference between the price a dealer is willing to pay (bid) and the price at which they will sell (ask) is known as the 'spread'. It is an indicator of liquidity and transactional risk in a market.
Step-by-step explanation:
The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the spread. This is typically seen in transactions involving securities such as stocks, bonds, or currency exchanges. The bid price represents the maximum price that a buyer is willing to pay for an asset, while the ask (or offer) price is the minimum price that a seller is willing to accept.
A wider spread usually indicates a lower liquidity in the market or higher transactional risk. In contrast, a narrow spread often reflects a high liquidity and lower risk. The size of the spread can be affected by various factors such as market volatility, the presence of market makers, and the trading volume of the asset.
Spread is the appropriate answer to the student's question, making option 5 the correct choice among the given options.