# Assume that the speed of light is infinite. Suppose the limit order book for a relatively illiquid stock is the following at 10:00:00:000 (ten hours, zero minutes, zero seconds, zero

Assume that the speed of light is infinite. Suppose the limit order book for a relatively
illiquid stock is the following at 10:00:00:000 (ten hours, zero minutes, zero seconds, zero
milliseconds):
Price Quantity Price Quantity
\$7.72 9 \$7.68 2
\$7.75 2 \$7.65 7
\$8.00 5 \$7.50 8
\$10.00 120 \$6.00 40
\$20.00 100 \$5.00 200
(a) What would be the average price paid per share for a hypothetical market buy order
for 11 shares under the limit order book shown above
Average price paid per share:
(b) You still did not submit any order. A market buy order for 150 shares from another
trader is submitted and executed at 10:00:00:100. How does the order book look like at
10:00:00:101 (i.e., immediately after this market buy order for 150 shares is executed)
Price (\$) Quantity Price (\$) Quantity
(c) The proverbial blink of an eye takes around 300ms. Unfortunately, you start blink-
ing at 10:00:00:000 and thus miss the change in the limit order book from part (b). At
10:00:00:200, you casually press the “Enter” key and place a market order to buy 11
shares, which is immediately executed. Note that your order is executed after the market
buy order for 150 shares from the other trader. At 10:00:00:300 (i.e., when you reopen
What number do you see on the screen
Average price paid per share:
(d) Let’s now consider what would have happened if instead of placing the market buy
order for 11 shares from part (c), you had placed a limit buy order at 10:00:00:200. How
would the order book would have looked immediately after you submitted a limit order
to buy 11 shares with a limit price of \$7.75 per share (again, instead of the market buy
order for 11 shares)? Note that your limit buy order is still placed after the execution of