Argentino is looking to invest some of his cash in silver or sell some of his...

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Argentino is looking to invest some of his cash in silver or sell some of his...

Argentino is looking to invest some of his cash in silver or sell some of his silver holdings for cash, depending on market conditions.

a. Argentino goes to his nearest exchange and finds that market maker #1 quotes him ($18, $20). What is the price which Argentino would have to pay to buy an ounce of silver from market maker #1?

b.What is the price at which Argentino could sell an ounce of silver to market maker #1?

c. Suppose that Argentino believes that there might be better pricing from a different market maker. So, he approaches market maker #2, from whom he gets a quote of ($18.5,$21)

If makers #1 & #2 are the only market makers in the local silver market, what is the market spread on silver that Argentino faces?

business finance

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Answer 1

Answer #1

a) the price to buy is $20

b)the price to sell is $18

c) #1 = $2

#2 = $2.5

total market spread = $3

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Answer 2

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