CFA Level I · CFA Level I Exam · Equity Issuance and Trading
A stock's order book shows these limit orders. Buys: 1,000 shares at 20.10; 2,000 at 20.08. Sells: 1,500 at 20.12; 2,500 at 20.15. A new market order to buy 3,000 shares arrives. The average execution price is closest to:
The average price is closest to 20.14. The market buy fills 1,500 shares at 20.12 and 1,500 at 20.15, costing 60,405 in total, or 20.135 per share. The best ask alone understates the cost because the order walks up the book.
- A20.12
- B20.14Correct
- C20.15
Explanation
A market buy executes against sell orders: 1,500 at 20.12 = 30,180; the remaining 1,500 at 20.15 = 30,225. Total 60,405 / 3,000 = 20.135, closest to 20.14. Using only the best ask (20.12) ignores the depth, and 20.15 uses only the last price level.
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