Repeat the previous problem supposing that the brokerage fee is quoted as 0.3% of the bid or
Question:
Previous Problem
ABC stock has a bid price of $40.95 and an ask price of $41.05. Assume there is a $20 brokerage commission.
a. What amount will you pay to buy 100 shares?
b. What amount will you receive for selling 100 shares?
c. Suppose you buy 100 shares, then immediately sell 100 shares with the bid and ask prices being the same in both cases. What is your round-trip transaction cost?
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In this problem the brokerage fee is variable and depends on the actual dol...View the full answer
Answered By
Jehal Shah
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