Question

Consider the following limit order book for a share of stock. The last trade in the stock occurred at a price of $95.

Limit Buy Orders			Limit Sell Orders
Price	Shares		Price	Shares
$94.75	800		$95.25	120
94.50	1,100		96.50	120
94.25	800		99.75	200
94.00	200		103.25	120
93.50	900

a.	If a market buy order for 120 shares comes in, at what price will it be filled? (Round your answer to 2 decimal places.)

Best price

$

b.	At what price would the next market buy order be filled? (Round your answer to 2 decimal places.)

Next best price

$

c.

If you were a security dealer, would you want to increase or decrease your inventory of this stock?

	Increase
	Decrease

Answer 1

Answer a. If a market buy order for 120 shares comes in, at what price will it be filled?

Buy price will be at price 95.25 for 120 share.

Answer b. At what price would the next market buy order be filled?

Next buy order will be filled at price of 96.50

Answer c. if you were a security dealer, would you want to increase or decrease your inventory of this stock?

Security dealer would like to increase inventory of this stock as it has considerable demand below $95