You Own Two Put Option Contracts on Magpie Stock with an Exercise

question 386

Multiple Choice

You own two put option contracts on Magpie stock with an exercise price of $37.50. What is the total intrinsic value of these contracts if the stock is currently selling for $35.90 a share?

• A) -$320
• B) -$160
• C) $0
• D) $160
• E) $320

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Definitions:

Rate Of Return

A metric used to evaluate the efficiency of an investment, calculated by dividing the profit or loss of the investment by its initial cost.

Stock Offering

The process by which a company issues shares of its stock to raise capital, either through an initial public offering (IPO) or a secondary offering.

Annual Dividend

The yearly sum of dividends paid per share by a company to its shareholders.

Required Return

The minimum expected return an investor seeks for holding a particularly risky investment.