33. 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?
Answer: D
An investor will pay $2,515 to buy 100 shares of ABC stock.
The quote for ABC stock shows a bid price of 25.05 and an ask price of 25.15. To purchase shares, an investor must pay the ask price, which is 25.15 per share.
A) $500
This option is incorrect because $500 does not reflect the cost of buying 100 shares at the ask price. The calculation does not align with the given stock quote.
B) $700
This option is also incorrect. While $700 might represent a fraction of the cost for purchasing shares, it does not accurately reflect the total cost based on the ask price of 25.15.
C) $2,505
This option is incorrect as it assumes a price of 25.05 instead of the ask price of 25.15. The total for 100 shares at this price would not represent the actual cost for an investor looking to buy.
D) $2,515
This is the correct option. To find the total cost for 100 shares, one must multiply the ask price of 25.15 by 100. Thus, 25.15 x 100 equals $2,515.
Conclusion
The correct answer is $2,515, as it accurately reflects the total amount required to purchase 100 shares at the ask price of 25.15. All other options fail to represent the actual cost based on the stock quote provided, confirming that understanding the bid-ask spread is crucial for investors.