31
24) Heather places an order to buy 525 shares of stock. This is an order for
A) five round lots and one odd lot.
B) 21 round lots of 25.
C) one odd lot.
D) five hundred round lots and twenty-five odd lots.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
25) An order to sell 300 shares of ABC stock at the best available price is called a
A) limit order.
B) market order.
C) stop loss order.
D) fill-or-kill order.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
26) Market orders are usually executed
A) only after all limit orders have been executed.
B) at the average price during the previous trading session.
C) at the closing price for the day’s trading.
D) before the price can change significantly if the order is placed while the markets are in
session.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: New Question
Learning Goal: Learning Goal 5
32
27) McDonald’s stock is now selling for $92 per share. Kim wants to buy 100 shares but only
if she can do so at $90 or less. She should place a(n)
A) stop order.
B) market order.
C) limit order.
D) odd-lot order.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Revised
Learning Goal: Learning Goal 5
28) Which one of the following statements about limit orders is correct?
A) The execution of the trade will occur prior to the close of trading on the day the trade is
placed.
B) The execution will occur at the regular open on the day following the day the trade is placed.
C) The trade may be executed only at the limit price or better at any time prior to expiration or
cancellation of the order.
D) The trade will be executed at the market price at the end of the third business day, if not
executed previously at the limit price.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
29) A fill-or-kill order will be
A) executed immediately upon order arrival on the floor of the exchange.
B) will be cancelled if not immediately executed at the stated price or better.
C) will be cancelled at the end of the trading day if not executed by that time.
D) in effect until cancelled by the customer who placed the order.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
33
30) Ryan places a good-’til-canceled limit order to sell 300 shares of KM at $18 a share. When
his order reaches the trading floor, KM is trading at $18.20. Which of the following statements
is true concerning Roy’s order?
A) The trade will not be executed and will be immediately cancelled.
B) The specialist will record the order in the order book and execute the trade as soon as the
price hits $18.00.
C) The brokerage firm will sell the 300 shares at $18.20 and keep the additional $0.20 as a
commission.
D) The order will be executed at $18.20 with the proceeds credited to Roy’s account.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
31) Which of the following statements concerning market, stop loss and limit orders are
correct?
I. Market orders guarantee both a price and an execution.
II. Market orders guarantee an execution but not a price.
III. Limit orders guarantee a price but not an execution.
IV. Stop-loss orders may never be executed.
A) I and III only
B) II, III and IV only
C) I and IV only
D) II and IV only
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Revised
Learning Goal: Learning Goal 5
34
32) On March 15, Marcos placed a good-’til-canceled order to buy 200 shares of ABC at $10 a
share. ABC sold between $10.50 and $11.00 on that day. Over the following two months the
stock price continued to rise and Marcos forgot about the order. After the markets closed on
June 6, some bad news concerning ABC was released. The stock opened on June 7 at a price of
$8.00 a share. Which one of the following statements is correct concerning Marcos’ order?
A) The order was cancelled on May 15 because it had not been executed within the allowable
two-month time period.
B) The order was executed on March 15 at $10.50 a share since that was the best available
price of the day.
C) The order was executed on June 7 at a price of $10.00 a share.
D) The order was executed on June 7 at a price of $8.00 a share.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
33) Which one of the following statements is correct about a good-’til-cancelled order?
A) The order generally expires after six weeks.
B) The order will automatically renew unless cancelled by the customer.
C) The order helps customers obtain a specific price without watching the market continuously.
D) The order will be cancelled at the end of the trading day if not executed.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
35
34) On October 12, Kevin placed a day order to purchase 100 shares of ABC stock at $21 a
share. During the day, the stock sold at prices ranging from $21.01 to $22.49. Over the
following month the stock sold in a range of $21.60 to $23.05. On December 2, the market
declined radically and the price of ABC stock dropped to $19.94. Which one of the following
statements is correct concerning Allen’s order?
A) The order was never executed.
B) The order was executed at $21.01 per share.
C) The order was executed at $22.49.
D) The order was executed at $19.94.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
35) Ryan bought a stock three years ago for $6 a share. Today, June 22, the stock is selling for
$72 a share. Ryan is afraid that the price will fall and does not want to lose his profits so he
places a stop-loss order to sell at $70. The stock sells between $71 and $75 throughout the
remainder of the day on June 22. On the morning of June 23, the stock opens at $9 a share
based on rumors of a possible bankruptcy due to inappropriate accounting procedures. Which
one of the following statements is true concerning this situation?
A) Ryan was able to sell his stock for $70 a share thereby protecting his profits.
B) Ryan’s stock was sold for $9 a share causing him to lose most of his profits.
C) Ryan still owns his shares of stock since his order was never executed at the $70 price.
D) Ryan received a call from the specialist asking him what he wanted to do about his order.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5
36
36) Three years ago, Emily bought 200 shares of HQ at $27.00 per share. HQ shares have risen
to $57.50 per share. If the stock continues to rise, she wants to hold it, but she fears that the
price could fall quickly and she will lose most of her profit. Which of the following decisions
would be best?
A) Place a limit order to sell at $60.00.
B) Place a stop-limit order at $55.00.
C) Place a stop-loss order at $27.00.
D) Place a stop-loss order at $55.00.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Revised
Learning Goal: Learning Goal 5
37) Mike bought 200 shares of EG stock two years ago at $16 per share. The stock has traded
in a range of $21 to $44 a share over the past year. EG is now selling for $43.60 a share. EG
announces its earnings today and Mike feels the stock could go to $60 on good news or fall to
$30 on bad. To protect his profits, the most appropriate order for him to place is
A) market order to sell immediately.
B) a limit sell order at $60.00.
C) a stop loss order at $42.
D) a stop-limit order to sell at $45.
managers
AACSB: 8 Application of knowledge (Able to translate knowledge of business and management
into practice)
Question Status: Previous Edition
Learning Goal: Learning Goal 5