3 points Save
When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of General Motor's stock, General Motors receives:
the "spread" between the Bid and Ask of the transaction.
the dollar amount of the transaction, less brokerage fees.
only the par value of the common stock.
nothing.
What do you think the answer is?
well this is confusing to me i do not kno what they mean by spread, i do not think the answer is nothing. i think they will get the par value
Brittany or Alisha or Lashay --
The spread is the difference between the price that Brian sells his stock for $12.75 and Patricia buys the stock for $13.00.
The spread is used to pay for the costs of the transaction.
http://www.vanguard.com.au/Personal_Investors/PITopNav/FAQ/index.aspx#Whatisthebuysellspread
When a company such as GM first issues stock, it receives the money for this initial offering. After that, the stock is bought and sold between individual investors. The company only benefits from each transaction by the intrinsic value the investors place on this company. In short, the company doesn't receive anything by buys and sells of its stock.
When Patricia sells her General Motors (GM) common stock to Brian, General Motors does not directly receive any money from this transaction. The money exchanged in the sale goes between Patricia and Brian, not to General Motors. General Motors only directly receives money when it initially issues the stock to investors, such as during an initial public offering (IPO) or a secondary offering.
In the case of Patricia selling her GM stock and Brian purchasing it, General Motors would not receive the spread between the Bid and Ask prices of the transaction. The Bid price is the highest price a buyer is willing to pay for a stock, while the Ask price is the lowest price a seller is willing to accept. The spread is the difference between the Bid and Ask prices and represents potential profit for the brokerage firm facilitating the transaction, not General Motors.
General Motors also does not receive the dollar amount of the transaction, less brokerage fees. The money from the transaction goes to Patricia as the seller and Brian as the buyer. The brokerage fees, if any, would be paid to the brokerage firm for facilitating the transaction.
Furthermore, General Motors does not receive only the par value of the common stock in this transaction. The par value is the nominal or face value of a stock, which is determined when the company initially issues the stock. During subsequent transactions, the stock is typically bought and sold at market prices, which can be above or below the par value.
In summary, in the scenario described, General Motors does not directly receive any money or value from the transaction between Patricia and Brian. The money exchanged goes between the buyer and seller, and General Motors only receives money when it initially issues the stock.