A Put Option If Purchased and Held for 1 Year

question 9

Multiple Choice

A put option if purchased and held for 1 year. The Exercise price on the underlying asset is $40. If the current price of the asset is $36.45 and the future value of the original option premium is (- $1.62 ) , what is the put profit, if any at the end of the year?

• A) $1.62
• B) $1.93
• C) $3.55
• D) $5.17

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Definitions:

Direct Materials Purchases Variance

The difference between the actual cost of direct materials purchased and the expected (budgeted) cost of these materials.

Standard Direct Labor-Hours

The estimated amount of labor time required to produce one unit of output, based on established standards.

Variable Overhead Rate Variance

The difference between the actual and the standard cost of variable overheads in a production process.

Direct Materials Purchases Variance

The difference between the actual cost of direct materials purchased and the expected (or standard) cost, used for budgeting and cost control purposes.