SIE practice questionmediumCost Basis
An investor purchases 100 shares of stock at $40 per share and pays a $50 commission. What is the investor's cost basis per share?
- A$40.50✓ Correct answer
- B$50.00
- C$40.00
- D$39.50
Explanation
Why A — $40.50
Cost basis includes the purchase price plus any transaction costs such as commissions. Total cost = (100 x $40) + $50 commission = $4,050. Cost basis per share = $4,050 / 100 = $40.50. Cost basis is important for calculating capital gains or losses when the shares are eventually sold. The commission increases the cost basis, which reduces the taxable gain (or increases the deductible loss) upon sale.
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