Ignoring commissions, what would have been your rate of return on this investment? What would be your rate of return if you had put in a market order?

Fin 550 chap 4.

The rate of return for this investment is 50% if you place a limit purchase order at $24 per month. It is done by subtracting the $24 purchase price from $36, and then multiplying that figure by the purchase price. So $(36 – 24) / 24 = 0.50 or 50%.

The decline in stock price during the month would mean that your rate of return if you put in a Market Order is much lower. Specifically, it would be calculated as $(20 – 24) / 24 = -0.17 or -17% because your purchase price was higher than what it dropped to before eventually jumping back up again. This venture wouldn’t have been financially viable if it had not followed market order.

Overall then it is clear that while limit orders may provide potential benefits they also carry some risk should stock prices dip unexpectedly – so investors need carefully weigh up pros & cons each type when determining which route take going forward given current market conditions.