Question

P2-1 Transaction costs You would like to purchase one Class A share of Berkshire Hath- away through your Scottrade brokerage account. Scottrade charges a $7 commission for online trades. You log into your account, check the real-time quotes for Berk- shire Hathaway (you see a bid price of $262,850 and an ask price of S263,770) and submit your order. a. What is the current bid/ask spread for Berkshire Hathaway Class A shares? b. If Scottrade routes your buy order to the NYSE, where Berkshire Hathaway is listed, whats the potential minimum your total transaction costs will be? c. If, instead, Scottrade routes your buy order to the Nasdag, where Berkshire Hathaway is not listed, whats the potential maximum your total transaction costs will be? d. Regardless of how your trade is executed, based on the bid/ask spread what is the market value of your trade?
0 0
Add a comment Improve this question Transcribed image text
Answer #1

a)Bid ask spread= ask price-bid price
=263770-262850=920
b)the minimum transaction cost per share will be the =bid/ask spread+ commission on online
=920+7=927
c)As here the shares not listed in NASDAQ the cost will be only bid/ask spread and it is 920
d)market value of trade=(bid+ask)/2
=(262850+263770)/2=263310

Add a comment
Know the answer?
Add Answer to:
P2-1 Transaction costs You would like to purchase one Class A share of Berkshire Hath- away...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Transaction costs You would like to purchase one Class A share of Berkshire Hathaway through your...

    Transaction costs You would like to purchase one Class A share of Berkshire Hathaway through your Scottrade brokerage account. Scottrade charges a $8 commission for online trades. You log into your? account, check the? real-time quotes for Berkshire Hathaway? (you see a bid price of a $262, 850 and an ask price of $263, 810?) and submit your order. a. What is the current? bid/ask spread for Berkshire Hathaway Class A? shares? b. If Scottrade routes your buy order to...

  • P2-2 (similar to) Question Help Transaction costs In late December you decide, for tax purposes, to...

    P2-2 (similar to) Question Help Transaction costs In late December you decide, for tax purposes, to sell a losing position that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year. However, since you still believe that Twitter is a good long-term investment, you wish to buy back your position in February the following year. To get...

  • P2-2 Transaction costs In late December you decide, for tax purposes, to sell a losing posi...

    P2-2 Transaction costs In late December you decide, for tax purposes, to sell a losing posi tion that you hold in Twitter, which is listed on the NYSE, so that you can capture the loss and use it to offset some capital gains, thus reducing your taxes for the current year However, since you still believe that Twitter is a good long-term investment, you wish to buy back your position in February the following year. To get this done you...

  • Use the following exchange quotes to help answer problems 18-19 NYSE NASDAG Bid Bid Ask 150.13...

    Use the following exchange quotes to help answer problems 18-19 NYSE NASDAG Bid Bid Ask 150.13 Company Y 18. Currently you have $120.00 in cash and 1000 shares of Stock Y in your brokerage account. You plan to sell your 1000 shares of Stock Y and use the proceeds to purchase as many shares of Stock X as possible. Assume you cannot borrow or buy partial shares of stock; you will also buy or sell at the best price offered....

  • Question 36 (Mandatory) (0.5 points) At your full-service brokerage firm, it costs $120 per stock trade....

    Question 36 (Mandatory) (0.5 points) At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13? $16,906.00 $16,546.00 $17,026.00 $17,146.00 Question 37 (Mandatory) (0.5 points) You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT