What term describes the difference between a dealer's purchase price and selling price in securities transactions?

What term describes the difference between a dealer's purchase price and selling price in securities transactions?

• A. Bid
• B. Spread
• C. Ask
• D. Offer

Answer: (B)

The term that describes the difference between a dealer's purchase price and selling price in securities transactions is known as the spread. The spread is a critical concept in trading and is an indicator of the liquidity of a security; a narrower spread generally signifies a more liquid market, while a wider spread can indicate a less liquid market. In the context of financial markets, the bid price is the price a buyer is willing to pay for a security, while the ask (or offer) price is the price a seller is willing to accept. The spread, therefore, represents the cost incurred by traders in entering or exiting their positions and is essential for understanding the dynamics of pricing in the securities market. When traders evaluate securities, the spread offers insight into the transaction costs associated with buying or selling those securities.

The term that describes the difference between a dealer's purchase price and selling price in securities transactions is known as the spread. The spread is a critical concept in trading and is an indicator of the liquidity of a security; a narrower spread generally signifies a more liquid market, while a wider spread can indicate a less liquid market.

In the context of financial markets, the bid price is the price a buyer is willing to pay for a security, while the ask (or offer) price is the price a seller is willing to accept. The spread, therefore, represents the cost incurred by traders in entering or exiting their positions and is essential for understanding the dynamics of pricing in the securities market. When traders evaluate securities, the spread offers insight into the transaction costs associated with buying or selling those securities.