Instructing your broker to buy or sell a stock at a particular price is a:

• A. stop order
• B. market order
• C. limit order
• D. short sale

Answer: (C)

Verified step by step guidance

1. Understand the concept of a limit order: A limit order is an instruction to buy or sell a stock at a specific price or better. It ensures that the transaction occurs only at the desired price or a more favorable one.
2. Differentiate between the types of orders: A market order executes immediately at the current market price, while a stop order becomes a market order once a specified price is reached. A limit order, however, specifies the exact price for execution.
3. Analyze the problem statement: The question asks about instructing a broker to buy or sell a stock at a particular price. This aligns with the definition of a limit order, as it specifies a price for the transaction.
4. Clarify the incorrect options: A stop order triggers a market order when a specific price is reached, and a market order executes at the current price without specifying a particular price. A short sale involves selling borrowed shares, which is unrelated to the concept of specifying a price for buying or selling.
5. Conclude the reasoning: Based on the definitions and analysis, the correct answer to the problem is 'limit order,' as it matches the requirement of specifying a particular price for the transaction.