The current price of Nifty Nellie Corporation's (NNC) common stock is $20 per share. Churnem Brokerage Corporation charges a transactions cost of 2.5% of the total amount of a transaction. For example, on the purchase of 10 shares of stock for $200, the transaction cost would be $5.00. a. What would 200 shares of NNC's common stock cost? b. How much would an investor receive from selling 200 shares of NNC's common stock? c. Ignoring potential price changes, how much money would an investor lose from buying and then immediately selling 200 shares at $20? Where would the lost money go? d. In what way are the costs and issues involved in these transactions similar to or dissimilar from buying and selling on an internet site such as www.ebay.com?
The current price of Nifty Nellie Corporation's (NNC) common stock is $20 per share. Churnem Brokerage Corporation charges a transactions cost of 2.5% of the total amount of a transaction. For example, on the purchase of 10 shares of stock for $200, the transaction cost would be $5.00. a. What would 200 shares of NNC's common stock cost? b. How much would an investor receive from selling 200 shares of NNC's common stock? c. Ignoring potential price changes, how much money would an investor lose from buying and then immediately selling 200 shares at $20? Where would the lost money go? d. In what way are the costs and issues involved in these transactions similar to or dissimilar from buying and selling on an internet site such as www.ebay.com?
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
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Transcribed Image Text:The current price of Nifty Nellie Corporation's
(NNC) common stock is $20 per share.
Churnem Brokerage Corporation charges a
transactions cost of 2.5% of the total amount of
a transaction. For example, on the purchase of
10 shares of stock for $200, the transaction
cost would be $5.00.
a. What would 200 shares of NNC's common
stock cost?
b. How much would an investor receive from
selling 200 shares of NNC's common stock?
c. Ignoring potential price changes, how much
money would an investor lose from buying and
then immediately selling 200 shares at $20?
Where would the lost money go?
d. In what way are the costs and issues
involved in these transactions similar to or
dissimilar from buying and selling on an
internet site such as www.ebay.com?
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