Series 7 practice questioneasyOrder Types — Limit Orders
A customer enters a limit order to buy 200 shares of ABC at $45. The current market price is $47. When will this order be executed?
- AImmediately at $47
- BOnly if the price rises to $49 or above
- CAt the end of the trading day at whatever price is available
- DOnly if the price drops to $45 or below✓ Correct answer
Explanation
Why D — Only if the price drops to $45 or below
A buy limit order sets the maximum price the customer is willing to pay. The order will only be executed at the limit price or lower. Since the current market price of $47 is above the $45 limit, the order will not execute until the price drops to $45 or below. Limit orders guarantee price but not execution.
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