Question7 Commonwealth Bank Australia (CBA) is currently trading in the market as follows: [table]
Stock | Bid | Ask CBA | $175.50 | $175.70
[/table] If you wish to sell 100 shares of CBA, and the commission is 0.50%, what proceeds would you receive if you placed a market sell order for CBA (round to the nearest dollar)? $16,965 $17,462 $17,375 $17,482 $17,472 ResetMaximum marks: 3 Flag question undefined

Question

BlackTom AI · Accepted Answer

Market sell orders execute at the bid price, so use $175.50 per share to compute proceeds. Relevant concepts: (1) market sell fills at the bid (not the ask), (2) commission is a percentage of the transaction value, and (3) net proceeds = gross sale value − commission.

Step-by-step calculation:
1. Gross sale value = number of shares × bid price = 100 × $175.50 = $17,550.00.
2. Commission = 0.50% of the gross sale value = 0.005 × $17,550.00 = $87.75.
3. Net proceeds = gross sale value − commission = $17,550.00 − $87.75 = $17,462.25.
4. Rounded to the nearest dollar = $17,462.

Why this is correct:
- A seller receives the bid price; using $175.50 is therefore correct. The commission is specified as 0.50% (not a flat fee), so it must be applied as a percentage of the $17,550 sale amount. Subtracting the computed commission yields $17,462.25, which rounds to $17,462.

Why the other choices are incorrect (briefly):
- $17,482 corresponds to mistakenly using the ask price ($175.70) as the sale price (100 × $175.70 = $17,570; minus 0.5% = $17,482.15 → $17,482).
- $17,375 matches applying a 1.0% commission to the correct bid-based gross ($17,550 − 1% = $17,374.50 → $17,375), so it reflects the wrong commission rate.
- $16,965 and $17,472 are not consistent with the correct bid price and 0.5% commission; they reflect other calculation mistakes or rounding errors.

Final confirmation: Net proceeds rounded to the nearest dollar = $17,462, matching the provided correct answer.

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