SIE (Securities Industry Essentials) Practice Exam

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What is known as the difference between the bid and ask prices?

Spread
Rate
Margin
Gap

The correct answer is: Spread

The correct term for the difference between the bid and ask prices is the spread. This is because the spread refers to the difference in price between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). This is different from the other options because a rate is usually used to refer to an interest or exchange rate, a margin is a measure of leverage in trading, and a gap refers to a sudden jump or change in price. Therefore, the spread is the most appropriate term for the difference between the bid and ask prices in financial markets.