Suppose the New York stock exchange were to impose a fee of $.0025 per share in addition to all existing fees and costs on all transactions carried out on the exchange.
a. What effect, if any, would this tend to have on the price and expected returns of securities trading on the exchange? Explain your reasoning.
b. Suppose Fastrac Inc. now trades for 24 1/8 bid, 24 1/4 asked, while SloMo Enterprises trades at 25 3/4 bid 27 asked. Which of these two securities would find its returns most affected by the additional cost? Why?
c. What, if any, differences might you expect to observe between investors holding Fastrac Inc. and those holding SlowMo Enterprises? Explain