Suppose that in Problem 21.3 the bid–ask spreads for the two companies are normally distributed. For Company A the bid–ask spread has a mean of 0.01 and a standard deviation of 0.01. For Company B the bid–ask spread has a mean of 0.02 and a standard deviation of 0.03. What is the cost of unwinding that the investor is 95% confident will not be exceeded? 

Problem 21.3

Suppose that an investor has shorted shares worth $5,000 of Company A and bought shares worth $3,000 of Company B. The proportional bid–ask spread for Company A is 0.01 and the proportional bid–ask spread for Company B is 0.02. What does it cost the investor to unwind the portfolio?