Rachel and Mary both have decided to buy 100 shares of WWW.COM a hot Internet stock.
QUESTION
Rachel and Mary both have decided to buy 100 shares of WWW.COM, a hot Internet stock. The market price is $240 per share when Rachel places a market order and Mary places a limit order at $230 per share. One week later, the price of WWW.COM is $305 per share after having increased. How much profit has Rachel made? How much profit has Mary made?
Solution: For Rachel Market Order: Market Price of Share = $240 Price of Share (After 1 week) = $305 per share Number of Shares = 100 Rachels Profit = ($305 $240)*100 = $6500 For Mary LimitOrder: Market Price of Share = $240 Limit Price = $230 per share
Price of Share (After 1 week) = $305 per share Number of Shares = 100 Marys order will be executed if the share price drops to $230 or below. So, Marys Profit = $0
ANSWER:
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