Question
Which of the following characteristics accurately describes the stock market? An active market that determines the price of a firms shares A fixed-income market where
Which of the following characteristics accurately describes the stock market?
An active market that determines the price of a firms shares
A fixed-income market where participants buy and sell debt securities
In a dealer market, some dealers hold a certain inventory of specific securities and create a liquid market by purchasing and selling their inventories. These dealers make a market and are thus called market makers. Agents in the market bring investors to the dealers through a network of terminals and electronic systems. Where do dealer profits come from in a dealer market?
Dividend payments
The bid-ask spread
Interest charges
Erik, a trader, wants to buy 1,000 shares of XYZ stock, while a second trader, Alison, is willing to sell 1,500 shares of the same stock. Unfortunately, Erik and Alison dont know one another and must complete their transactions using the stock exchanges market-making dealer. XYZs market maker is willing to sell her shares for $27.00 per share and purchase additional shares for $26.00 per share. Select the most appropriate values in the following table:
Term | Value |
---|---|
Bid price | |
Ask price | |
Bid-ask spread |
If the market maker is willing to purchase the entire block of 1,500 shares from Alison and, from that block, resell 1,000 shares to Erik, then the market makers net profit from Eriks transactionexcluding any inventory effectswill be
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started