Explanation:

The cost of liquidation in a normal market is based on the half spread between the bid and offer prices. It is calculated as: Cost of liquidation = 0.5 × (Offer - Bid) × Quantity

Company A: 0.5 × ($96 - $95) × 1,000,000 = $500,000 ($0.5 million)
Commodity: 0.5 × ($51.5 - $50.5) × 10,000,000 = $5,000,000 ($5.0 million)
Company Y: 0.5 × ($50.5 - $49.25) × 10,000,000 = $6,250,000 ($6.25 million)

Total cost of liquidation = $0.5 million + $5.0 million + $6.25 million = $11.75 million.

Q.43 A company has bought the following assets:

1 million shares of company A, which are bid `$95`, offer `$96`

10 million ounces of a commodity, which is bid `$50.5`, offer `$51.5`

10 million shares of company Y, which are bid `$49.25`, offer 50.5

what is the cost of liquidation in a normal market?

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Last updated: July 5, 2026 at 07:20

$5.25 million

$8.75 million

$10.25 million

$11.75 million

Financial Risk Manager Part 2

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Q.43 A company has bought the following assets: 1 million shares of company A, which are bid $95, offer $96 10 million ounces of a commodity, which is bid $50.5, offer $51.5 10 million shares of company Y, which are bid $49.25, offer 50.5 what is the cost of liquidation in a normal market?

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