Which of the following statements hold true for spread?
Click on the arrows to vote for the correct answer
A. B. C. D.D
Option D is the correct answer: "Spread" is the difference between the bid and ask price.
When trading financial instruments such as stocks, bonds, and currencies, two prices are commonly quoted: the bid price and the ask price. The bid price is the price at which buyers are willing to purchase the security, while the ask price is the price at which sellers are willing to sell the security. The spread is simply the difference between these two prices.
For example, suppose the current bid price for a stock is $50.00 and the ask price is $50.25. The spread would be $0.25 ($50.25 - $50.00).
The spread is an important concept for investors and traders because it represents the cost of executing a trade. In the example above, if an investor wanted to buy the stock, they would have to pay the ask price of $50.25, which is higher than the current bid price of $50.00. This difference represents the transaction cost or "spread" of the trade.
Spreads can vary depending on the market and the specific security being traded. In highly liquid markets with many buyers and sellers, spreads tend to be small, while in less liquid markets, spreads can be wider.
Option A is incorrect because the price asked by sellers is the ask price, not the spread. Option B is incorrect because the quoted price to buy shares is the bid price, not the spread. Option C is incorrect because the rate at which a dealer will buy the base currency is the bid price, not the spread.