Consider that a private company has given you an opportunity to buy equity shares. You verify two facts: (i) the companys shareholders earn an annual return of 20 percent and will for the foreseeable future, and (ii) previous transactions of the shares of this closely held company suggest the bid-ask spread is quite high at 5 percent of the price of the shares. You decide you will not invest in this company. Why not?

A. Actually, you should invest in this company

B. It is a private company, meaning it is very risky

C. Transaction costs: the bid-ask spread associated with trading shares eats away at your return

D. Asymmetric information: you have no idea what your actual return will be