Question

You find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. If you purchase or sell the stock, you must pay a flat commission of $25. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?
$25
$30
$55
$50

Answer 1

Answer:

The correct answer is $55.

Explanation:

Implicit costs, also known as opportunity costs, are the costs of lost opportunities due to business decisions.

That is, they refer to the income that the resources of a company would otherwise generate if they are put to any other use apart from its current allocation.

To calculate this value, you have to:

Purchased shares = 100

So, 100 (10.30 - 10.25) + 2 (.25) = $ 55