Yin has been following market movements of her portfolio. In October 2020, she decided to sell a losing position in Volkswagen (VW) that she held on the Frankfurt Stock Exchange (Börse Frankfurt). She intended to capture the loss and use it to offset some capital gains for reducing her tax liability. Since she still considers VW to be a long-term investment, she plans to buy back her position in January 2021. She called her stockbroker and instructed him to immediately sell off her 1,400 shares in VW and buy them back in January. The stockbroker charges a flat rate of €6 per transaction and an additional €20 for phone-based instructions each time. Total commission for the broker-assisted trade in October was €26 and only €6 in January.

a. Suppose that Yin’s total transaction costs for selling the 1,400 shares of VW in October were €62. What was the bid/ask spread for VW at the time her trade was executed?

b. Given that VW is listed on the Frankfurt Stock Exchange, does Yin’s total transaction costs for October seem reasonable? Why or why not?

c. In January, Yin received her statement and noted that the total transaction costs for buying the 1,400 shares of VW were €34. What was the bid/ask spread at the time this trade was executed?

d. What are Yin’s total round-trip transaction costs for both selling and buying the shares, and what could she have done differently to reduce the total costs?