Final answer:
A limit order is an instruction to buy or sell a security at a specified price. If a 'Day' limit order is not executed by the end of the trading day, it is typically canceled. 'Good Till Canceled' orders remain active until executed or canceled by the client.
Step-by-step explanation:
When a client places a limit order in the stock market, it is an instruction to buy or sell a security at a specified price or better. If the limit order is not executed by the end of the trading day due to the market price not reaching the limit specified by the client, then typically, one of two things can happen depending on the type of limit order placed:
- If it is a 'Day' order, the limit order will be canceled at the end of the trading day.
- If it is a 'Good Till Canceled' (GTC) order, it will remain active until either it is executed or the client cancels it. However, even GTC orders can expire after a set period if not stated otherwise.
Partial executions can occur if the limit order is only partially filled during the trading day, but if the order has not been executed at all by the end of the day, and is a Day order, it will not carry over to the next trading day. Hence, the correct answer to the student's question is that the order will be canceled if not executed by the end of the day.