Explanation

An immediate-or-cancel (IOC) limit buy order executes immediately at or below the limit price and cancels any unfilled portion. The trader wants to buy 700 shares at a maximum price of $20.50.

Step 1: Analyze the order book

From the provided table:

Sell Orders (Ask side):

Step 2: Determine which orders can be executed

Since this is a limit buy order at $20.50, the trader can only buy shares at prices ≤ $20.50. Looking at the sell orders:

• Order 1: 200 shares at $20.20 ✓ (≤ $20.50)
• Order 2: 300 shares at $20.35 ✓ (≤ $20.50)
• Order 3: 400 shares at $20.50 ✓ (≤ $20.50)
• Order 4: 100 shares at $20.65 ✗ (> $20.50)
• Order 5: 200 shares at $20.70 ✗ (> $20.50)

Step 3: Calculate execution

Total shares available at or below $20.50:

• 200 shares @ $20.20 = $4,040
• 300 shares @ $20.35 = $6,105
• 400 shares @ $20.50 = $8,200 Total available: 900 shares

Since the trader wants 700 shares, they can fill the entire order from the first three sell orders.

Step 4: Calculate average price

Total cost for 700 shares:

• Buy all 200 shares from Order 1 @ $20.20 = $4,040
• Buy all 300 shares from Order 2 @ $20.35 = $6,105
• Buy 200 of the 400 shares from Order 3 @ $20.50 = $4,100

Total cost = $4,040 + $6,105 + $4,100 = $14,245 Total shares = 700

Average price = $14,245 ÷ 700 = $20.35

Step 5: Verify

• The average price of $20.35 matches option A.
• The trader pays less than the limit price of $20.50 because some shares are bought at lower prices ($20.20 and $20.35).
• The IOC order executes immediately and cancels any unfilled portion (in this case, the remaining 200 shares from Order 3 at $20.50 are not needed).

Therefore, the correct answer is A. $20.35.