Transaction costs You would like to purchase one Class A share of Berkshire Hathaway through your Scot trade brokerage account. Scot trade charges a $7 commission for online trades. You log into your account, check the real-time quotes for Berkshire Hathaway (you see a bid price of $262,850 and an ask price of $263,770) and submit your order.
a. What is the current bid/ask spread for Berkshire Hathaway Class A shares?
b. If Scot trade routes your buy order to the NYSE, where Berkshire Hathaway is listed, what’s the potential minimum your total transaction costs will be?
c. If, instead, Scot trade routes your buy order to the Nasdaq, where Berkshire Hathaway is not listed, what’s the potential maximum your total transaction costs will be?
d. Regardless of how your trade is executed, based on the bid/ask spread what is the market value of your trade?