Final answer:
A buy limit order is an order to purchase a security at a specified price or lower, which allows an investor to control the price they are willing to pay. It differs from price ceilings or price floors, which are government-imposed controls to regulate the maximum and minimum prices legally allowed.
Step-by-step explanation:
In the context of buying securities, a buy limit order refers to an instruction to purchase a security at a specified price or lower. As such, the correct statement is: 1) A buy limit order is an order to buy a security at a specified price or lower.
When an investor places a buy limit order, they are dictating the maximum price that they are willing to pay for the security. If the market price reaches or falls below this specified limit, the order will be executed. Buy limit orders are a way to control the price that an investor pays and can help in managing investment strategies effectively. On the other hand, a price ceiling is a legal maximum price set by government laws, known as price controls, which regulate prices besides the natural market forces determining them. A price floor is the opposite, being a legal minimum price. Both of these are different from a buy limit order, as they are concerned with regulatory limits rather than individual transaction conditions by an investor.