Question

Search this cours Ch 02: Assignment - Financial Markets and Institutions 4. The stock market A Aa Which of the following characteristics accurately describes the stock market? An active market that determines the price of a firm's shares O A fixed-income market where participants buy and sell debt securities 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 $34.90 per share and purchase additional shares for $33.75 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 Type here to search o e eu 400 W

Answer 1

Please do Upvote if you are served. Feel free to reach out in the comments

Cheers!!!

Answer (4a) .An active market that determines the price of a firm's shares.

Answer (4b) . Bid-Ask Spread.

Answer (4c)

Bid price - 33.75

Ask price - 34.9-

Spread = 34.9 - 33.75 = 1.15

Answer (4d)
Pofit of market-maker = (34.9 - 33.75) * 1000

= $ 1150