Description
Investments Activity
For this week's activity, go to the Strayer library search page and use your textbook to answer the following questions using the Week 7 Investments Template [DOCX].
- Describe the differences among the following three types of orders: market, limit, and stop loss. Provide examples of each in your own words.
- What is a short sale of stock? Provide an example in your own words.
- Use your textbook to define the term short sale as it pertains to stock.
- Describe buying on margin. Provide an example in your own words.
- Why is it illegal to trade on insider information? Provide an example in your own words.
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Explanation & Answer
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Week 7 Homework: Definitions
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FIN100: Principles of Finance
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Week 7 Homework
1. Describe the differences among the following three types of orders: market, limit, and
stop loss. Provide examples of each in your own words.
Answer:
A market order is a purchase or sale of securities that is executed immediately upon
receipt of the order. It ensures that the order will be completed but not the price at which
it will be done. A purchase limit order is executed only at or below the limit price, and a
sell limit order is executed only at or above the limit price (Kaminski, and Lo, 2014).
Example:
An investor wishes to acquire no more than $20 worth of ABC stock. The investor may
place a limit order for this amount, which will be filled only if the price of ABC stock
falls to $20 or less. A stop loss order is a purchase or sale of shares a...
