Consider the following limit order book for a share of stock. Bid Ask Price Shares Price...

Consider the following limit order book for a share of stock.

Bid		Ask
Price	Shares	Price	Shares
$79.75	500	$79.80	500
79.70	900	79.85	400
79.65	700	79.90	900
79.60	1000	79.95	700
78.65	600

a. If a market sell order for 1200 shares comes in, at what price(s) will it be filled? from low to high

b. Immediately after the order in a) is executed, what is the bid-ask spread of the stock? (Keep two decimal places.)

Solutions

Expert Solution

A) A market sell order will be executed at the best available bid prices,

First 500 shares will be filled @ 79.75

Next 700 shares will be filled @ 79.70

Immediately after the market order is executed, the best available bid price is 79.70 and the best available ask price is 79.80

Bid ask spread = 79.80 - 79.70 = 0.10

jeff jeffy answered 1 year ago

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