SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 40: Answer and Explanation

Question: 40

Which of the following is used to calculate a trading profit for tax purposes?

• A. Basis points
• B. Bid price
• C. Ask price
• D. Cost basis

Correct Answer: D

Explanation:

D: Choice D is correct because taxable capital gains are the sales proceeds minus the cost basis. Choice A is incorrect because basis points report the interest rate, with one hundred basis points representing one percent. Choices B and C are incorrect because these are prices offered by a market maker or a broker-dealer to potential buyers and sellers.