18. An investor is seeking to buy shares of common stock from a market maker. The market maker provides a price to the investor. This price is known as the:
Answer: B
The price provided by the market maker to the investor is known as the ask.
The ask is the price at which a market maker is willing to sell shares of common stock to an investor. This terminology is essential for understanding trading in financial markets.
A) bid.
The bid is the price that a buyer is willing to pay for a stock, which is opposite to the ask. Since the question specifically asks for the price provided by the market maker to the investor, the bid does not apply in this context.
B) ask.
The ask is the correct answer as it refers to the price at which the market maker is willing to sell the stock. This price is crucial for investors as it determines the cost of purchasing the shares from the market maker.
C) spread.
The spread is the difference between the bid and ask prices. While it is a relevant term in this context, it does not directly answer the question about the specific price provided to the investor by the market maker.
D) indication of interest (IOI).
An indication of interest (IOI) is a non-binding expression of interest in buying or selling a security but does not represent a specific price for a transaction. Thus, it does not answer the question concerning the price provided by the market maker.
Conclusion
The ask is definitively the correct answer as it represents the price at which the market maker is willing to sell shares to the investor. All other options either refer to different concepts or do not directly answer the question posed, thereby confirming that the ask is the essential term in this scenario.