Which one of these statements is correct?
A)Investors earn a return called a spread.
B)Dealers pay a fee,called the spread,to brokers.
C)Investors sell at the ask price.
D)Dealers buy at the bid price.
E)Brokers maintain an inventory of securities.

Question

Quizplus · Accepted Answer

Dealers, also known as market makers, buy securities at the bid price and sell them at the ask price. They make money by earning the difference between these prices, which is known as the spread. Investors do not earn the spread nor do brokers pay the spread. Brokers facilitate trades between investors and dealers but do not maintain an inventory of securities.

Which One of These Statements Is Correct