The spread between the bid price and the offer price is a measure of
A) the underwriters' spread.
B) brokers' fees.
C) liquidity costs.
D) sunk costs.

Question

Quizplus · Accepted Answer

The spread between the bid price and the offer price reflects the liquidity costs, which are the costs incurred when buying or selling an asset due to the difference between the buying and selling price. This spread is a measure of how easy or difficult it is to trade an asset in the market. The underwriters' spread refers to the difference between the offer price and the amount paid to the issuer, and brokers' fees are commissions charged by brokers for their services. Sunk costs are costs that have already been incurred and cannot be recovered.

The Spread Between the Bid Price and the Offer Price