Mr. Arne Freidrich looks at SoTon Co.'s latest annual report and feels that the company is performing well. However, he believes it is not worth spending more than $70 per share of SoTon. He contacts his broker and tells him to acquire 50 shares of SoTon only if they are less than $70 a share. Which of the following orders has Mr.Freidrich placed to acquire the shares?

Question

Quizplus · Accepted Answer

Mr. Friedrich has placed a buy limit order, which instructs his broker to acquire the shares of SoTon only if they are available at or below his specified price of $70 per share. This order allows Mr. Friedrich to control the maximum price that he is willing to pay for SoTon stock. A stop-loss order is used to limit losses in case the stock price drops below a specified level, while a liquidation order is used to sell all holdings of a particular stock. A market order instructs the broker to buy or sell shares immediately at the prevailing market price. However, Mr. Friedrich has specified a price ceiling, so a buy limit order is the appropriate choice.

Mr Arne Freidrich Looks at SoTon Co