Self-Test Problem

(Solution in Appendix)

  1. Learning Goal 3

    ST2–1 Transaction costs Assume that you use a TD Ameritrade brokerage account and place your stock trades through the Interactive Voice Response (IVR) Phone System, which charges a $34.99 commission per stock trade. You would like to sell 1,500 shares of Microsoft Corporation, which is listed on the Nasdaq stock exchange, so you check the real-time quotes through TD Ameritrade and see a bid price of $57.31 and an ask price of $57.33.

    1. What is the current bid/ask spread for Microsoft?

    2. If you place the sell order and TD Ameritrade routes the order to Microsoft’s listing exchange, what are your likely total transaction costs? (Hint: Nasdaq is a dealer market.)

    3. What are your total transaction ...

Get Principles of Managerial Finance, 15th Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.