CFA Level I · CFA Level I Exam · Equity Issuance and Trading
An investor wants to buy shares of a stock currently quoted at 50.00 but is unwilling to pay more than 49.00 per share. Which order type is most appropriate for this investor?
A limit buy order at 49.00 is most appropriate. It guarantees the investor pays no more than 49.00 per share, though execution is not assured. A market order would fill near 50.00, and a stop buy is triggered by rising prices, so neither fits.
- ALimit buy order at 49.00Correct
- BMarket buy order
- CStop buy order at 49.00
Explanation
A limit buy order executes only at the limit price or lower, so it caps the price the investor pays. A market order executes immediately at the best available price, which would be about 50.00. A stop buy at 49.00 sits below the current price and is used to trigger a purchase when price rises, which does not suit this goal.
Did you get it right without looking?
One question tells you little. A timed set on Equity Issuance and Trading shows your real accuracy, how long you take and where you lose marks.
More Equity Issuance and Trading questions
- Which of the following best describes the primary purpose of a circuit breaker used by exchanges and regulators?
- Which of the following is the most likely reason that securities market regulation requires issuers to disclose material information?
- An investor buys 500 shares at $80 with 50% initial margin. One year later the price is $92. Ignoring interest, dividends and commissions, t…
- Convertible preference shares have a par value of $100, a 6% dividend, and convert into 4 common shares each. The common shares trade at $22…
- An investor buys 500 shares at $60 per share with an initial margin requirement of 50%. The share price rises to $72. Ignoring interest and …
- A trading venue matches buy and sell orders using a rule-based, electronic order book, and no dealer commits its own capital to take the oth…