Suppose that the best limit orders on the limit order book are as follows at t = 0

Bid Ask

Price Size Price Size

11.00 100 12.00 200

10.50 200 12.50 200

10.00 150 13.50 100

9.00 100

and that

at t = 1 a limit order to sell 150 shares at $11.50 is submitted;

at t = 2 a limit order to buy 200 shares at $11.50 is submitted;

at t = 3 a limit order to sell 500 shares at $10.50 is submitted;

at t = 4 a market order to buy 300 shares is submitted;

at t = 5 a limit order to buy 100 shares at $11.00 is submitted;

at t = 6 a limit order to sell 150 shares at $11.50 is submitted;

at t = 7 a limit order to sell 300 shares at $9.50 is submitted;

at t = 8 a market order to buy 250 shares is submitted.-

(a) What is the Volume-Weighted Average Price (VWAP) at t = 4?

(b) What is the (absolute and relative) quoted spread at t = 5?

(c) How many shares are traded from t = 1 to t = 8?

(d) How do market orders affect liquidity? Why? How do limit orders affect liquidity?