Question

Here is some price information on Fincorp stock. Suppose that Fincorp trades in a dealer market. Bid Asked 22.65 22.79

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. Omit the "$" sign in your response.) Price $

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. Omit the "$" sign in your response.) Price $

c. Suppose you have submitted a limit order to sell at $23.04. What will happen?

The trade will not be executed

The trade will be executed

d. Suppose you have submitted a limit order to buy at $22.71. What will happen?

The trade will not be executed

The trade will be executed

Answer 1

Bid (buy order) price is $22.65
Asked (sell order)price is $22.79

Part a:
If an order is submitted to buy at market price, the trade will execute at the available ask price. So, the buy order will execute at a price of $22.79

Part b:
If an order is submitted to sell at market price, the trade will execute at the available bid price. So, the sell order will execute at a price of $22.65.

Part c:
A limit order to sell at $23.04 will execute either at a price of $23.04 or above.
The buy order price (that is bid price of $22.65) available is less than $23.04. So, the trade will not be executed.

Part d:
A limit order to buy at $22.71 will execute either at a price of $22.71 or less than $22.71
The sell order (or asked) price is $22.79 which is higher than $22.71.
So, the trade will not be executed.