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Consider the following limit-order book for FinTrade stock
Consider the following limit-order book for FinTrade stock. The last trade in the stock oc- curred at a price of $50. Limit Buy orders Price Shares $49.75 500 $49.50 800 $49.25 500 $49.00 200 $48.50 600 Limit Sell orders Price Shares $50.25 100 $51.50 100 $54.75 300 $58.25 100 a. If a market buy order for 100 shares is submitted now, at what price will it be filled? b. If a trader submits a market sell order for 2,500 shares, what is the average price at which his order is executed? c. If a trader now submits a limit order to sell 200 shares of Fin Trade at $55.00, how will this limit-order book change? Please draw a new table to show your answer.
Expert Solution
a) The market buy order will be matched for 100 shares will be matched with the best selling price of $50.25 of 100 shares and the order will be executed .
So the order will be filled at a price of $50.25 per share
b) The market sell order of 2500 shares will be filled with 500 shares @$49.75, 800 shares @$49.50,500 shares @$49.25, 200 shares @$49 and 500 shares @$48.50
Average price = (500*49.75+800*49.50+500*49.25+200*49+500*48.5)/2500 = $49.26 per share
c) After orders as per a) and b) are executed and limit order to sell 200 shares at $55 is placed,
The limit order book will look like
| LIMIT BUY ORDERS | LIMIT SELL ORDERS | ||
| Price | Shares | Price | Shares |
| $48.50 | 100 | $51.50 | 100 |
| $54.75 | 300 | ||
| $55 | 200 | ||
| $58.25 | 100 |
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