6. An order to sell 100 shares of stock at $50, placed when the market price is $45, is known as:
Answer: B
A limit order
A limit order is an instruction to sell a stock at a specified price or better. In this case, the order to sell 100 shares at $50 while the market price is $45 exemplifies a limit order because it sets a price limit on the sale.
A) stop order.
A stop order is designed to sell a stock once it reaches a certain price, thereby limiting losses. However, this option does not apply here since the order is placed at a specific price to sell, not to trigger a sale based on a market price crossing a threshold.
B) limit order.
This is the correct answer as a limit order is specifically defined as an order to sell or buy a stock at a particular price or better. The scenario provided directly matches this definition, making it the appropriate choice.
C) market order.
A market order is executed immediately at the current market price without any price limit. Since the order to sell at $50 while the market is at $45 does not fit this description, this option is incorrect.
D) stop-limit order.
A stop-limit order combines aspects of both stop orders and limit orders, setting a stop price that, once reached, converts the order into a limit order. The scenario described does not involve a stop price, thus making this option unsuitable.
Conclusion
The limit order is the only option that accurately reflects the action described in the question: selling shares at a specified price rather than waiting for a market condition to trigger a sale. All other options either misinterpret the type of order being placed or do not apply to the context of the question. Thus, option B is definitively correct.