Corporate Finance: The Core Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition)
4th Edition
ISBN: 9780134409276
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 1, Problem 19P
Suppose the following orders are received by an exchange for Cisco stock
- Limit Order: Buy 200 shares at $25
- Limit Order: Sell 200 shares at $26
- Limit Order: Sell 100 shares at $25.50
- Limit Order: Buy 100 shares at $25.25
- a. What are the best bid and ask prices for Cisco stock?
- b. What is the current bid-ask spread for Cisco stock?
- c. Suppose a market order arrives to buy 200 shares of Cisco. What average price will the buyer pay?
- d. After the market order in (c) clears, what are the new best bid and ask prices, and what is the new bid-ask spread for Cisco?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose that the last sale of Company X stock was at a price of $50. Further suppose that an investor wishes to place a market order to purchase 25,000 shares of Company X stock. What is the volume weighted average price that the investor will trade at in each of the market? What if the investor purchase 120,000 shares instead 25,000?
Market Depth - Market A vs B
Market AMarket B#SharesOffer ($)#SharesOffer ($)30,00050.0010,00050.0040,00050.0210,00050.0110,00050.0570,00050.0320,00050.0680,00050.0430,00050.0760,00050.0510,00050.0940,00050.05
Consider the following limit order book of the stock on 13-Mar-2021
Limit Buy Orders
Limit Sell Orders
Price
Shares
Price
Shares
$38.00
100
$40.00
350
36
350
42
100
34
500
44
500
32
1,000
46
1,000
You use a market order buy 500 shares. Suppose you can then sell all the shares at the price of $48 in the following day. Which answer is the closest value to the rate of return on this investment?
A.
9%
B.
12%
C.
15%
D.
18%
You find the following order book on a particular stock. The last trade on the stock was at $66.76.
Buy Orders
Sell Orders
Shares
Price
Shares
Price
250
$66.75
250
$66.78
500
66.74
650
66.79
900
66.73
1,000
66.81
275
66.71
300
66.82
100
66.83
a. If you place a market buy order for 200 shares, at what price will it be filled? (Round your answer to 2 decimal places.)
b. If you place a market sell order for 200 shares, at what price will it be filled? (Round your answer to 2 decimal places.)
c. Suppose you place a market order to buy 500 shares. At what price will it be filled? Choose the appropriate answer.
multiple choice
500 shares at $66.83
250 shares at $66.78 and 250 shares at $66.79
250 shares at $66.83 and 250 shares at $66.82
500 shares at $66.76
Chapter 1 Solutions
Corporate Finance: The Core Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition)
Ch. 1.1 - Prob. 1CCCh. 1.1 - Prob. 2CCCh. 1.2 - Prob. 1CCCh. 1.2 - Prob. 2CCCh. 1.3 - What are the important changes that have occurred...Ch. 1.3 - What is the limit order book?Ch. 1.3 - Prob. 3CCCh. 1 - Prob. 1PCh. 1 - What does the phrase limited liability mean in a...Ch. 1 - Prob. 3P
Ch. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - You are a shareholder in a C corporation. The...Ch. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Prob. 9PCh. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Describe the important changes that have occurred...Ch. 1 - Prob. 16PCh. 1 - Explain how the bid-ask spread is determined in...Ch. 1 - Prob. 18PCh. 1 - Suppose the following orders are received by an...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Consider the following limit order book for FinTrade stock. The last trade in the stock occurred at a price of $50. Limit Buy Orders Limit Sell Orders Price Shares Price Shares $ 49.75 500 $ 49.80 100 49.70 900 49.85 100 49.65 700 49.90 300 49.60 400 49.95 100 48.65 600 Required:a. If a market buy order for 100 shares comes in, at what price will it be filled? (Round your answer to 2 decimal places.) b. At what price would the following market buy order be filled? (Round your answer to 2 decimal places.) c. If you were a security dealer, would you want to increase or decrease your inventory of this stock?arrow_forwardAn investor tells their broker to short 1,000 shares of a stock that is currently priced at $50. Is the investor betting that the price will go up or down in this scenario? Where do the shares for a short sale come from?arrow_forwardSuppose you have 100 common shares of Tillman Industries. The EPS is $4.00, theDPS is $2.00, and the stock sells for $60 per share. Now Tillman announces a twofor-one split. Immediately after the split, how many shares will you have, what willbe the adjusted EPS and DPS, and what would you expect the stock price to be?arrow_forward
- You would like to sell 200 shares of Xenith Bankshares, Inc. (XBKS). The current ask and bid quotes are $4.66 and $4.62, respectively. You place a limit sell order at $4.65.If the trade executes, how much money do you receive from the buyer?arrow_forwardSuppose you own 1,000 common shares of Laurence Incorporated. The EPS is $12.00, the DPS is $5.00, and the stock sells for $75 per share. Laurence announces a 2-for-1 split. Immediately after the split, how many shares will you have? Round your answer to the nearest whole number. shares What will the adjusted EPS and DPS be? Round your answers to the nearest cent. EPS: $ DPS: $ What would you expect the stock price to be? Round your answer to the nearest cent.arrow_forwardYou would like to sell 220 shares of Echo Global Logistics, Inc. (ECHO). The current ask and bid quotes are $15.44 and $15.39, respectively. You place a limit sell order at $15.43.If the trade executes, how much money do you receive from the buyer?arrow_forward
- Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker. If the initial margin is 55%, how much did you borrow from the broker? Assume you sold short 100 shares of common stock at $40 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $50?arrow_forwardA stock market speculator can choose between (i) buying 1000 shares ofa certain stock for $80 per share, and (ii) buying 10, 000 European-stylecall options on the stock with a strike price of $90 for $8 per option.Which of the following is true? For choice (ii) to give a better result whenthe option matures, the share price must be above:arrow_forwardThe bid price of Staple common stock is $18.10 and offer price is $18.62. How much will an investor have to pay to buy 100 shares of Staple common stock directly from dealer? Place your answer to the nearest dollar. Do not use a dollar sign or comma in your answer.arrow_forward
- Suppose a company whose shares are trading at $20 per share becomes a target of a tender offer and the suitor is prepared to pay $28 per share. You run a valuation and concludes that a fair valuation of the company would be $1 billion. If the company has 40 million shares outstanding, explain briefly the possible reason(s) for the suitor to offer that price?arrow_forwardSuppose you purchase 20 call contracts on SAMSONG Co. stock. The strike price is $120, and the premium is $8. If the stock is selling for $140, $128, $120 per share at expiration, what are your call options worth? What is your net profit?arrow_forwardAssume that you own 1,500 shares of $10 par value common stock and the company has a 5-for-1 stock split when the market price per share is $30. What will probably happen to the market price per share of the stock and the par value per share of the stock? Multiple Choice A) Market price per share will be about $6 per share, and par value will be $2 per share. B) Market price per share will be about $6 per share, and par value will be $50 per share. C) Market price per share will be about $150 per share, and par value will be $2 per share. D) Market price per share will be about $150 per share, and par value will be $50 per share.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Investing For Beginners (Stock Market); Author: Daniel Pronk;https://www.youtube.com/watch?v=6Jkdpgc407M;License: Standard Youtube License