Explanation

For an immediate-or-cancel (IOC) limit buy order at $20.50 for 700 shares:

Order Book Data:

Bid Side (Buy Orders):

Ask Side (Sell Orders):

Execution Process:

1. The trader wants to buy 700 shares at a maximum price of $20.50
2. IOC order means: execute immediately at or below the limit price, cancel any unfilled portion
3. The order will match with sell orders at or below $20.50

Available sell orders at or below $20.50:

• Order 1: 200 shares at $20.20
• Order 2: 300 shares at $20.35
• Order 3: 400 shares at $20.50

Total available: 200 + 300 + 400 = 900 shares at or below $20.50

Execution for 700 shares:

• First 200 shares at $20.20
• Next 300 shares at $20.35
• Next 200 shares at $20.50 (from Order 3's 400 shares)

Average price calculation: $\text{Total cost} = (200 \times 20.20) + (300 \times 20.35) + (200 \times 20.50)$ $\text{Total cost} = 4,040 + 6,105 + 4,100 = 14,245$ $\text{Average price} = \frac{14,245}{700} = 20.35$

Answer: $20.35 (Option A)

Key Points:

• IOC orders execute immediately at best available prices up to the limit price
• The order fills at the best available prices first (lowest ask prices)
• The average price is weighted by the quantities filled at each price level