Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

please help with part a,b,c,d Transaction costs In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter

please help with part a,b,c,d image text in transcribed
image text in transcribed
Transaction costs In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter , which is listed on the NYSE, 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 good long-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 1,200 shares of Twitter and then in early February buy them back. Charles Schwab charges a commission of 54.95 for online stock trades and for broker-assisted trades there is an additional $25 service charge, so the total commission is $29.95. a. Suppose that your total transaction costs for selling the 1,200 shares of Twitter in December were $59.95. What was the bid'ask spread for Twiter at the time your trade was executed? b. Given that Twitter is listed on the NYSE, do your total transaction costs for December seem reasonable? Explain why or why not. c. When your February statement arrives in the mail, you see that your total transaction costs for buying the 1,200 shares of Twitter were $47.95. What was the bidlask spread for Twitter at the time your trade was executed? a. The bidlask spread for Twitter, at the time your trade was executed, is $. (Round to the nearest cent) 1 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 good long-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 1,200 shares of Twitter and then in early February buy them back. Charles Schwab sharges a commission of $4.95 for online stock trades and for broker-assisted trades there is an additional $25 service charge, so the total commission is $29.95. a. Suppose that your total transaction costs for selling the 1,200 shares of Twitter in December were $59.95. What was the bidlask spread for Twitter, at the time your trade was executed? b. Given that Twitter is listed on the NYSE, do your total transaction costs for December seem reasonable? Explain why or why not c. When your February statement arrives in the mail, you see that your total transaction costs for buying the 1,200 shares of Twitter were $47.95. What was the bidesk spread for Twitter at the time your trade was executed? d. What are your total round-trip transaction costs for both selling and buying the shares, and what could you have done differently to reduce the total costs? a. The bidlask spread for Twitter, at the time your trade was executed, is $. (Round to the nearest cont.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting Information for Decisions

Authors: John Wild, Ken Shaw, Barbara Chiappetta

5th edition

978-1259347641

Students also viewed these Finance questions