$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$\text { ABC Limited: Order book }$
$\begin{array}{l}
\begin{array}{|c|c|r|r|}
\hline \begin{array}{c}
\text { Price } \
\text { (to buy) }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { (to buy) }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (to sell) }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { (to sell) }
\end{array} \
\hline \$ 1.00 & 50000 & \$ 1.10 & 25000 \
\hline \$ 0.90 & 25000 & \$ 1.20 & 50000 \
\hline \$ 0.80 & 50000 & \$ 1.30 & 100000 \
\hline
\end{array}
\end{array}$
-Given the order book for ABC limited,suppose a market order arrives to buy 100 000 shares.What is the cost of the 100 000 shares to the trader?

Question

$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$  \quad $$\text { ABC Limited: Order book }$
$\begin{array}{l}
\begin{array}{|c|c|r|r|}
\hline \begin{array}{c}
\text { Price } \
\text { (to buy) }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { (to buy) }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (to sell) }
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { (to sell) }
\end{array} \
\hline \$ 1.00 & 50000 & \$ 1.10 & 25000 \
\hline \$ 0.90 & 25000 & \$ 1.20 & 50000 \
\hline \$ 0.80 & 50000 & \$ 1.30 & 100000 \
\hline
\end{array}
\end{array}$
-Given the order book for ABC limited,suppose a market order arrives to buy 100 000 shares.What is the cost of the 100 000 shares to the trader?

Quizplus · Accepted Answer

The market order to buy will purchase shares at the best possible price (i.e.at the lowest price traders are willing to sell).However,there are only 25 000 shares available at the lowest sell price of $1.10,and therefore the remaining shares will be purchased at the next lowest share price of $1.20.Hence,the total cost of the shares will be 25000 F1F1F1S1F1F1F10 $1.10 + 50000 F1F1F1S1F1F1F10 $1.20 + 25000F1F1F1S1F1F1F10$F1F1F1S1F1F1F10 = $120000.

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