Question 1
Here is some price information on Fincorp stock. Suppose first that Fincorp trades in a dealer market
b. Suppose you have submitted an order to sell at the market. At what price will your trade be executed?
c. Suppose an investor has submitted a limit order to sell at $55.38. What will happen?
d. Suppose another investor has submitted a limit order to buy at $55.38. What will happen?
Stock Exchange: A stock exchange is where we can buy and sell stocks, bonds, futures, options, and other financial securities. Generally, we need a broker to execute our transactions who charges some percent of the transaction value as brokerage
Question 2
Question 3
Answer to question 1
The bid rate is the rate at which the market will buy.
The ask rate is the rate at which the market will sell.
Answer (a)
Suppose, we have submitted an order to our broker to buy at the market. We are buying which means the market is selling and will sell at the ask rate.
So the order will be executed at the ask rate i.e. 55.50
Answer (b)
Suppose, we have submitted an order to our broker to sell at the market. We are selling which means the market is buying and will buy at the bid rate.
So the order will be executed at the bid rate i.e. 55.25
Answer (c)
A limit order to sell means that the order will only be executed at the order price or higher. As the order price is $55.38 and currently the stock is selling at $55.25, the order will not be executed.
Answer (d)
A limit order to buy means that the order will only be executed at the order price lower. As the order price is $55.38 and as the current buy rate is $55.50, the order will not be executed.
Answer to question 2
a) Stock Price = Asked Price = 55.50
b) Stock Price = Bid Price =55.25
c) Trade will not beexceuted since we want to sell at 55.62 and price is 55.25
d) Trade will not beexceuted since we want to buy at $55.37 and price is 55.50
Answer to question 3
