Transaction costs In late December you decide to sell a losing position that you hold in Twitter so you can capture the loss and use it to offset some capital gains, thus rec 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 a your 1,100 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 1,100 shares of Twitter in December were $45.00. What was the bid/ask spread for Twitter at the time your trade wa 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 1,100 shares of Twitter were $40.20. What was the bid/ask spread 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?
Transaction costs In late December you decide to sell a losing position that you hold in Twitter so you can capture the loss and use it to offset some capital gains, thus rec 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 a your 1,100 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 1,100 shares of Twitter in December were $45.00. What was the bid/ask spread for Twitter at the time your trade wa 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 1,100 shares of Twitter were $40.20. What was the bid/ask spread 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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Answer letter D and below
Transcribed Image Text:c. The bid/ask spread for Twitter, at the time your trade was executed, is $0.0276. (Round to four decimal places.)
(Round to the nearest cent.)
d. Your total round-trip transaction costs for both selling and buying the shares is $
What could you have done differently to reduce the total costs? (Select the best answer below.)
A. Costs could have been reduced by placing both trades with a market maker.
B. Costs could have been reduced by placing both trades online with a request for routing to the NYSE where the chance of crossing with other public orders is greatest.
Transcribed Image Text:Transaction costs In late December you decide to sell a losing position that you hold in Twitter so you can capture the loss and use it to offset some capital gains, thus red
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 at
your 1,100 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 1,100 shares of Twitter in December were $45.00. What was the bid/ask spread for Twitter at the time your trade wa
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 1,100 shares of Twitter were $40.20. What was the bid/ask spread
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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