Problem 5-3 The following order book exists for a particular stock. The last tra
ID: 2788936 • Letter: P
Question
Problem 5-3 The following order book exists for a particular stock. The last trade on the stock was at $27.09 Buy Orders Sell Orders Shares Price Shares Pri 250 200 900 125 $27.08 27.07 27.06 27.04 250 $27.11 500 27.12 1,000 27.14 800 27.15 700 27.16 a. If you place a market buy order for 200 shares, at what price will it be filled? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Share price b. If you place a market sell order for 200 shares, at what price will i be filled? Round your answer to 2 decimal places. Omit the "$" sign in your response.) Share price c. Suppose you place a market order to buy 500 shares. At what price will it be filled? Choose the appropriate answer. 500 shares at $27.16 500 shares at $27.09 250 shares at $27.16 and 250 shares at $27.15 250 shares at $27.11 and 250 shares at $27.12Explanation / Answer
Market order instruct the broker or dealer to obtain the best price immediately available when filling the order.
Answer A)
200 Market Buy order will be executed at best offer price which is $27.11(since it is lowest) amoong all the sell orders.A Buy order will be immediately executed against lowest sell bid which is $27.11
Answer B) 200 Market Sell order will be executed at best buy price which is $27.08(since it is highest) among all the buy order orders.A sell order will be immediately executed against highest buy bid which is $27.08
Answer C correct answer is D, since market buy order will be filled against lowest sell price however lowest sell price has 250 shares so we will buy 250 shares at price of $27.11 and the remaining(500-250) 250 shares will be purchased at next lowest sell price of $27.12