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(a) Al Cromwell places a market order to buy a round lot of Thomas, Inc., common stock, which is traded on the NYSE and is currently quoted at $50 per share. Ignoring brokerage commissions, determine how much money will Cromwell probably have to pay. If he had placed a market order to sell, how much money will he probably receive? Explain.

(b) Imagine that you have placed a limit order to 100 shares of Sallisaw Tool at a price of $38, although the stock is currently selling for $41. Discuss the consequences, if any, of each of the following situations.

(i) The stock price drops to $39 per share two months before cancellation of the limit order.

(ii) The stock price drops to $38 per share

(iii) The minimum stock price achieved before cancellation of the limit order was $38.50. When the limit order was cancelled, the stock was selling for $47.50 per share.

(c) You have been researching a stock that you like, which is currently trading at $50 per share. You would like to buy the stock if it were a little less expensive say, $47 per share.

You believe that the stock price will go to $d70 by year and then level off or decline. You decide to place a limit order to buy 100 shares of the stock at $47 and a limit order to sell it at $70. It turns out that you were right about the direction of the stock price, and it goes straight to $75. What is your current position?

(d) You own 500 shares of Ups &Downs, Inc., stock. It is currently price at $50. You are going on vacation, and you realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good, and the stock price fell to $30 right after the announcement. It did, however, bounce back, and by the end of the day it was back to $42. What happened in your account?

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