Problem 5-3 The following order book exists for a particular stock. The last tra

Question

Problem 5-3 The following order book exists for a particular stock. The last trade on the stock was at $52.09. Buy Orders Sell Orders Shares Price $52.08 52.07 Shares Price 250 250 900 200 100 $52.11 550 52.12 1,000 52.14 650 52.15 250 52.16 52.06 52.04 a. If you place a market buy order for 100 shares, at what price will it be filled? (Round your answer to 2 decimal places. Omit the "$" sign in your response. Share price b. If you place a market sell order for 100 shares, at what price will it 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 450 shares. At what price ill t be filled? Choose the appropriate answer 100 shares at $52.16 and 350 shares at $52.15 450 shares at $52.09 100 shares at $52.11 and 350 shares at $52.12 450 shares at $52.16

Explanation / Answer

Solution: a. Share Price $52.11 Working Notes: If we place a market buy order for 100 shares, at $52.11 price would it be filled as Market will approved transactions in FIFO basis means market/Exchange execute order on the basis of first in sell order from order book and so on to fulfill buy request if any placed . b. Share Price $52.08 Working Notes: If we place a market sell order for 100 shares, at $52.08 price would it be filled as Market will approved transactions in FIFO basis means market/Exchange execute order on the basis of first in buy order from the stock order book and so on to fulfill sell request if any placed . c. Answer is 3rd option 100 shares at $52.11 and 350 shares at $52.12 Working Notes: The buy order of 450 share will filled by from 1st seller than remaining balance from 2nd seller in the order book. Please feel free to ask if anything about above solution in comment section of the question.

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