A market maker displays the following ABC stock quote: 25.05 - 25.15 [7x5]. Based upon the quote displayed, how much will it cost an investor to buy 100 shares?
It will cost an investor $2,515 to buy 100 shares of ABC stock.
The market maker's quote shows a bid price of 25.05 and an ask price of 25.15. To buy shares, an investor must pay the ask price, which is 25.15 per share. Therefore, for 100 shares, the total cost is calculated by multiplying the ask price by the number of shares.
This amount does not represent a realistic total cost for purchasing 100 shares of ABC stock since it is significantly lower than the ask price of 25.15 per share. The calculation does not reflect the actual market price needed for the transaction.
Similar to the previous option, this figure is also too low to cover the cost of buying 100 shares at the ask price of 25.15 per share. It disregards the necessary multiplication of the share price by the number of shares and thus misrepresents the total cost.
This amount reflects a miscalculation based on the bid price of 25.05 instead of the ask price of 25.15. The bid price is not applicable for buying shares; hence, this figure does not accurately represent the actual cost of acquiring 100 shares.
This is the correct total cost, calculated by multiplying the ask price of 25.15 by 100 shares, yielding 2,515. This amount accurately reflects the expense an investor incurs when purchasing shares at the market maker's displayed ask price.
The cost to buy 100 shares of ABC stock is determined by the ask price of 25.15, leading to a total of $2,515. Options A and B provide insufficient values, while option C incorrectly uses the bid price. Only option D accurately represents the correct calculation for the transaction based on the market quote provided.
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