Following U

question 60

Multiple Choice

Following U.S. Generally Accepted Accounting Principles, how is a change in accounting estimate handled?

• A)The new estimate must be used in the current and future years only.
• B)The new estimate must be used in the prior year financial statements only.
• C)The new estimate must be used in the future years only.
• D)The new estimate must be used in the prior, current and future years.

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Definitions:

Exercise Price

Also known as the strike price, it is the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Put-call Parity

A financial principle stating the relationship between the price of European put and call options with the same strike price and expiration date.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Underlying Stock

Underlying stock refers to the stock upon which a derivative contract, such as an option or futures contract, is based.