Question

Here is some price information on Fincorp stock. Suppose first that Fincorp trades in a dealer market.

Bid	Asked
55.25	55.50

a. Suppose you have submitted an order to your broker to buy at market. At what price will your trade be executed? (Round your answer to 2 decimal places.)

b. Suppose you have submitted an order to sell at market. At what price will your trade be executed? (Round your answer to 2 decimal places.)

c. What will happen suppose you have submitted a limit order to sell at $55.62?

• Trade will be executed.

• Trade will not be executed.

d. What will happen suppose you have submitted a limit order to buy at $55.37?

• Trade will be executed.

• Trade will not be executed.

Answer 1

Given about Fincorp Stock,

Bid price = $55.25

Ask price = $55.50

So, here Bid price is maximum price at which the stock could be sold in the market immediately and Ask price is the minimum price at which the stock could be bought from the market immediately.

a). So, for a market order to buy, trade will get execute at Ask price that is $55.50

b). For a market order to sell, trade will get execute at Bid price that is $55.25

c). For a limit order to sell at $55.62 order will only be execute when the ask price touch $55.62 or goes above it.

So, Trade will not be executed.

d). For a limit order to buyat $55.37 order will only be execute when the bid price touch $55.37 or goes below it.

So, Trade will not be executed.