You specialize in analyzing pharmaceutical companies. Tomorrow, the FDA is going to make an announcement about the approval of a pending drug that a certain company produces. You think that the stock of the company has an expected alpha of 0.8% tomorrow. The companys current BID is $50 and its current ASK is $50.2. Ignore commissions for this problem.

If you decided to enter a 200 share position for one day then exit your position, what is the best estimate of round-trip transactions cost you will pay?

$0

$20

$40

$60

You decided to enter a 200 share position for one day then exit your position. What is the amount of after transactions cost profit you would expect to make?

$20

$40

$60

$80

ou decide to enter a 200 share position for one day then exit your position. What would the realized alpha have to be for you to exactly break even on your round-trip trade (assuming the spread remained the same)?

		0.0%
		0.2%
		0.4%
		0.6%