Financial Market (14 marks)

The following table is a snapshot of the limit order book of stock A.

Bid

Ask

Price

Size

Price

Size

80.0

100

82.0

200

78.5

150

84.0

200

77.5

350

85.5

300

75.5

400

86.5

400

75.0

200

87.5

300

a)If a limit buy order of 600 shares at $85 comes in, how many shares will be executed? What is the average price? (4 marks)

b)What is the largest possible tick size of stock A? (2 marks)

c)Stock A is available for short sales. Simon is going to go short by making a limit sell order of 100 shares at $80. How much margin does he need to post to facilitate this trade if the initial margin requirement is 60%? (4 marks)

d)How can Simon close this position in (c)? What is his profit or loss (in percentage) if he closes his position in (c) at $72 later? (4 marks)