You Are a Speculator Who Sells a Put Option on Canadian

question 54

Multiple Choice

You are a speculator who sells a put option on Canadian dollars for a premium of $.03 per unit, with an exercise price of $.86. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is $.78 on the expiration date, your net profit per unit is:

• A) -$.08.
• B) -$.03.
• C) $.05.
• D) $.08.
• E) None of these are correct.

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Definitions:

Prior Period Adjustments

Corrections of errors in financial statements of prior periods or adjustments for omitted transactions.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, often with fixed dividends.

Common Stock

A form of equity stake that signifies ownership within a corporation, granting the owner the right to vote and a portion of the corporation's earnings via dividends.

Cash Dividends

Distributions of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.