Hi there! I’ve got a question about the Round-trip Commission in calculating the ETF’s total cost.

Here is the question: the bid-ask spread is 0.15%, the ETF commission is 0.1%, and the annual management fee is 0.08%. It is asking for a 3 months average annual total cost.

the Answer is 20.1%+0.15%+0.08%(3/12)=0.37%

Can anyone tell me why does it have to multiply a 2 for the commission, please?

The first original question is saying ETF commission, your question is saying round trip commission. Round trip commission = one way commission x 2.
And Holding period cost = Round trip commission + Bid-offer spread on purchase and sale + Management fee

In summary, in your question 0.55% is after multiplying by 2, meaning the one way commission is 0.275

My understanding is that usually the bid-offer spread given is already on sale and purchase, meaning it’s already multiple by 2. Actual CFAI formula is: Round trip trading cost (%) = (One way commission % x 2) + ( ½ x Bid ask-spread % x 2).

As you can see, you first divide the bid-ask spread by 2 to split it for purchase and sale, then multiply it by 2 to add back together. The end result is the same bid-ask spread you began with.