SIE practice questioneasyBid-Ask Spread
A stock is quoted at $25.10 bid and $25.30 ask. A customer who places a market order to buy will most likely pay:
- A$25.30✓ Correct answer
- B$25.20
- C$25.00
- D$25.10
Explanation
Why A — $25.30
The ask (or offer) price is the price at which a market maker is willing to sell. A customer buying at the market will pay the ask price of $25.30. The bid price ($25.10) is what the market maker will pay to buy — so a customer selling at the market would receive the bid. The difference ($0.20) is the bid-ask spread, which represents the market maker's profit on the transaction.
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