Q:
A person purchases stock XYZ (an Over The Counter stock) from a company who is also the market maker for XYZ. The price that the person would pay for the stock:

a) Does not include a markup
b) Includes the markup and commission
c) Includes the markup
d) Is discounted for the markup
e) None of these are true.

A:

The correct answer is c
When the firm is a market maker in the stock then it must act as a principle. Principal is the main party to a transaction, acting as either a buyer or seller for his/her own account and risk. Because the market maker must act as principal the person would only be charged a markup, not a commission.

Have a Financial Question?

RELATED FAQS

  1. What is the difference between markup and gross margin?

    Read more about the key differences between a company's gross margin and its pricing markup, two rough indicators of business ...
  2. What's the difference between profit margin and markup?

    Learn to differentiate between profit margin and markup, two accounting terms that are often used interchangeably but actually ...
  3. A market maker in the stock ABCD has filled a portfolio over time with prices as ...

    C is closest. Mark-up rules of fair practice on Nasdaq require market pricing. The NASD views markups in excess of 5% above ...
  4. What is the difference between gross profit margin and markup?

    Understand the distinction between gross profit margin and markup, and learn how each of these measures of profitability ...
  5. What is the difference between a long position and a call option?

    Learn what a long position in a stock is, what a call option is, and the difference between owning shares of a company and ...
  6. What is the difference between a broker and a market maker?

    A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts ...
RELATED TERMS
  1. Markup

    The difference between an investment's lowest current offering ...
  2. Markdown

    The difference between the highest current bid price among dealers ...
  3. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  4. Variable Cost-Plus Pricing

    A pricing method in which the selling price is established by ...
  5. Extensible Markup Language - XML

    A flexible markup language for structured electronic documents. ...
  6. Stock Cycle

    The evolution of a stock's price from an early uptrend to a price ...
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center