Total Costs of ETF Ownership

An ETF investor purchases shares with a 0.06% commission, and half of a 0.15% bid–ask spread. The investor sells after nine months, facing an annual management fee of 0.12%. What is the holding period cost?

Incorrect. It's possible that this calculation did not include the full "round trip" of trading costs from both purchasing and selling the ETF shares.

Correct! In this case, the holding period cost is: >$$ 0.06 \% \times 2 + 0.15 \% + \frac{9}{12}(0.12 \% ) = 0.360 \%$$. This represents the commission and bid–ask spread for both the purchase and the sale, or the "round trip" trading costs, plus the annual management fee scaled from 12 months down to the nine-month holding period.

Not quite. It's possible that this value was obtained by using the full annual management fee rather than just the fee for the holding period.

0.225%

0.360%

0.390%