Question

You find that the bid and ask prices for a stock are $14.25 and $15.45, respectively. If you purchase or sell the stock, you must pay a flat commission of $30. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars

Answer 1

$180

Step-by-step explanation:

The bid price of a stock is $14.25

The ask-price of a stock is $15.45

A flat commission of $30 must be paid in the stock

100 shares of stock are bought

Therefore, the total implied and actual transaction costs can be calculated as follows

= Commission+(ask price-bid price)×number of shares

= 30×2+($15.45-$14.25)×100

= 60+ 1.2×100

= 60+120

= $180

Hence the total implied and actual transaction cost is $180