Question

A stock market is a public market for trading a company's The difference between the price at which a dealer will sell a certain security and the price at which a dealer will buy a security is called the Cole, a trader, wants to buy 1,000 shares of XYZ stock, while a second trader, Abigail, is willing to sell 1,500 shares of the same stock. Unfortunately, Cole and Abigail don't know one another and must complete their transactions using the stock exchange's market-making dealer. XYZ's market maker is willing to sell her shares for $29.70 per share and purchase additional shares for $28.25 per share. Select the most appropriate values in the following table: Term Value Bid price Ask price Bid-ask spread If the market maker is willing to purchase the entire block of 1,500 shares from Abigail and, from that block, resell 1,000 shares to Cole, then the market maker's net profit from Cole's transaction-excluding any inventory effects-will be

Answer 1

Answer(1): A stock market is a public market for trading a company's "Equities" (stocks and derivatives).

Answer(2): The difference between the price at which the dealer will sell a certain security and the price at which a dealer will buy a security called, "Bid-ask Spread".

Answer(3):

Bid price = $28.25

Ask price = $29.70

Bid-Ask Spread = Ask price - Bid price

Bid-Ask spread: 29.70-28.25 = $1.45