Use the fair value from the previous two questions to calculate the follow two questions:...
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Use the fair value from the previous two questions to calculate the follow two questions: How much transaction cost per share for trading the shares of Avantek would Greg incur relative to the fair value if he sold to Kidder? If Greg later chooses Kidder for trading the remaining shares in the block of shares of Avantek, would his cost per share be the same as the cost per share for the first shares? Hint: If the true value of the stock is and a trader sells the stock to the market maker at the cost relative to the fair value for the trader is Market maker makes a dollar profit relative to the fairvalue ; Not sure whether his cost per share wouldincrease. ; Cost per share would not increase. ; His cost per share may becomesignificantly bigger for the remaining shares.
Use the fair value from the previous two questions to calculate the follow two questions:
How much transaction cost per share for trading the shares of Avantek would Greg incur relative to the fair value if he sold to Kidder? If Greg later chooses Kidder for trading the remaining shares in the block of shares of Avantek, would his cost per share be the same as the cost per share for the first shares?
Hint: If the true value of the stock is and a trader sells the stock to the market maker at the cost relative to the fair value for the trader is Market maker makes a dollar profit relative to the fairvalue
; Not sure whether his cost per share wouldincrease.
; Cost per share would not increase.
; His cost per share may becomesignificantly bigger for the remaining shares.
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