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April 21, 2018
 
 

Practice Questions

We've covered a lot of material on price and time limits. The best way to learn them is to run through the practice questions we've provided. All of these concepts will become second nature to you with a little practice. As always, if you have questions, please ask your broker or feel free to email us at questions@21stcenturyinvestor.com.

For questions 1 through 4, assume you place an order to buy 500 shares of ABC stock at market. ABC is trading for $50.

1) Your order could come back filled for $50.25.

a) True
b) False

2) It is possible that this order may not fill.

a) True
b) False

3) You buy 200 shares at $50, 200 shares at $50.25, 100 shares at $50.50. This is called:

a) Multiple fill
b) Partial fill
c) Multiple limit orders
d) This cannot happen with a market order

4) What time limit can you place on this order?

a) GTC
b) Day
c) You cannot place time limits on market orders
d) You can use either a day or GTC order depending on the situation

For questions 5 through 8, assume you place an order to buy 500 shares of ABC stock at a limit of $48.75 GTC. ABC is trading for $50.

5) This order is guaranteed to fill.

a) True
b) False

6) This order will only fill if it can be filled for $48.75 or lower.

a) True
b) False

7) Three hundred shares are executed at $48.75 with 20 days remaining on the GTC time limit. You now have an open order to buy 200 shares at $48.75 for the next 20 days.

a) True
b) False

8) This order can remain open for nine months if your broker allows it.

a) True
b) False

9) Market orders:

a) Guarantee fill but not the price
b) Guarantee price but not the fill
c) Guarantee fill and price
d) Do not guarantee anything

10) Limit orders:

a) Guarantee price but not the fill
b) Guarantee fill but not the price
c) Guarantee fill and price
d) Do not guarantee anything

11) A market order must use which time limit?

a) Immediate or cancel
b) Fill or kill
c) Day
d) GTC

12) A stock is trading for $40. You place an order to buy 200 shares for $40.30 or better. This order can be filled for:

a) $40.30 or higher
b) $40.30 or lower
c) Between $40 and $40.30
d) You cannot place a limit above the current market

13) A stock is trading for $50 and you place an order to buy 300 shares at market. The trade is executed at $52.30. What caused this?

a) A dishonest market maker
b) You didn't place an AON restriction
c) An or-better qualifier
d) A fast market

14) ABC is trading for $42 and rising rapidly. You place an order to buy 100 shares at $42.75 or better. Which of the following is not a possible fill?

a) Buy 100 at $42.70
b) Buy 100 at $42.75
c) Buy 100 at $42.80
d) Buy 100 at $42.73

15) XYZ is trading for $37 and you place an order to buy 600 shares at $38 or better. Which of the following is not a possible fill?

a) Buy 100 $37, buy 200 $37.20, buy 300 $38.10
b) Buy 600 $37
c) Buy 100 $37, buy 200 $37.50, buy 300 $37.75
d) Buy 200 $37.50, buy 400 $38

16) You place an order to buy 3,000 shares at $10. However, you do not want the trade unless you can be assured that you get all 3,000 shares for $10 or less. What can you do?

a) Mark the trade AON
b) Mark the trade "or-better"
c) Make it a limit order at $10
d) Make it a market order

17) You bought 200 ABC for $60 and it is now trading for $64. You place an order to sell 200 for $63.50 or-better. Which of the following is the only possible fill?

a) Sold 200 $63.47
b) Sold 200 $63.40
c) Sold 200 $63.45
d) Sold 200 $63.75

18) You purchased 300 ABC at $30. A few days later it spiked to $40 and is now falling quickly. Your goal is to get out of the stock. Which of the orders is best?

a) Market order
b) Limit order
c) AON restriction
d) Or-better order

19) You just purchased 300 ABC at $30. Now you wish to enter an order to sell it if it should hit $32. Which do you use?

a) Sell 300 ABC at market
b) Sell 300 ABC at a limit of $32
c) Sell 300 ABC at $30 or-better
d) Sell 300 ABC at $32 or-better

20) What is the biggest risk of using GTC orders?

a) You could get filled at a worse price
b) Forgetting that you placed them
c) You're not allowed to cancel them
d) You must place a limit price

21) You placed an order to sell 200 shares at a stop price of $30. What does this mean?

a) Your order will activate if the stock hit $30 or higher.
b) You are guaranteed to receive $30 if the stock hits $30.
c) Your order will become a market order if the stock hits $30 or lower.
d) You are guaranteed to receive $30 if the stock hits $30 or lower.

22) You placed an order to sell 100 shares at a stop price of $30 with a stop limit of $29.50. What does this mean?

a) Your order will activate if the stock hits $30 or lower but will only sell if you can get $29.50 or higher.
b) Your order will activate if the stock hits $29.50 or higher but will only sell if you can get $30 or higher.
c) Your order will activate if the stock hits $30 or higher and is guaranteed to get $29.50 or higher.
d) Your order will activate if the stock hits $30 or lower and is guaranteed to get $29.50 or higher.


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