In late December youdecide, for taxpurposes, to sell a losing position that you hold inTwitter, which is listed on theNYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year.However, since you still believe that Twitter is a goodlong-term investment, you wish to buy back your position in February the following year.

To get this done you call your Charles Schwab brokerage account manager and request that he immediately sell your 1,100 shares of Twitter and then in early February buy them back. Charles Schwab charges a commission of $4.95 for online stock trades and forbroker-assisted trades there is an additional $25 servicecharge, so the total commission is $29.95.

a. Suppose that your total transaction costs for selling the 1,100 shares of Twitter in December were $59.95. What was thebid/ask spread for Twitter at the time your trade wasexecuted?

b. Given that Twitter is listed on theNYSE, do total transaction costs for December seemreasonable? Explain why or why not.

c. When your February statement arrives in themail, you see that your total transaction costs for buying the 1,100 shares of Twitter were $47.95. What was thebid/ask spread for Twitter at the time your trade wasexecuted?

d. What are your totalround-trip transaction costs for both selling and buying theshares, and what could you have done differently to reduce the totalcosts?