In late December you decide to sell a losing position that you hold on Twitter so you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you believe that Twitter is a good long-term investment, you wish to buy back your position in February next year. You call your Charles Schwab brokerage account manager and request that he sell your 1,600 shares of Twitter and buy them back in February. Charles Schwab charges a commission of $25 for broker-assisted trades. a. Suppose that your total transaction costs for selling the 1,600 shares of Twitter in December were $45.00. What was the bid/ask 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 1,600 shares of Twitter were $40.20. What was the bid/ask 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?
In late December you decide to sell a losing position that you hold on Twitter so you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you believe that Twitter is a good long-term investment, you wish to buy back your position in February next year. You call your Charles Schwab brokerage account manager and request that he sell your 1,600 shares of Twitter and buy them back in February. Charles Schwab charges a commission of $25 for broker-assisted trades. a. Suppose that your total transaction costs for selling the 1,600 shares of Twitter in December were $45.00. What was the bid/ask 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 1,600 shares of Twitter were $40.20. What was the bid/ask 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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In late December you decide to sell a losing position that you hold on Twitter so you can capture the loss and use it to offset some
a. Suppose that your total transaction costs for selling the 1,600 shares of Twitter in December were
$45.00. What was the bid/ask 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
1,600 shares of Twitter were
$40.20. What was the bid/ask 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?
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