ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.054 or 5.4%
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0.044 or 4.4%
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0.064or 6.4%
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0.034 or 3.4%
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Detailed explanation-1: -The bid-ask spread equals the lowest asking price set by a seller minus the highest bid price offered by an interested buyer.
Detailed explanation-2: -Bid-Ask Spread (percentage) = ((Ask/Offer Price-Bid/Buy Price) – Ask/Offer Price) X 100. Example to help understand bid-ask spread calculation. Let’s say a stock is trading at Rs. 9.50 or Rs.
Detailed explanation-3: -The main factor determining the width of the bid-ask spread is the trading volume. Another critical factor affecting the bid-ask spread is market volatility. Stocks that are thinly traded generally have higher spreads. Also, the bid-ask spread widens during times of high volatility.
Detailed explanation-4: -Bid-Ask Spread = Ask price – Bid Price. Bid-Ask Spread = $21 – $20. Bid-Ask Spread = $1.