The Equity Method Should Generally Be Used to Account for an Investment

question 98

Multiple Choice

The equity method should generally be used to account for an investment in stock when the level of ownership is

• A) less than 10%.
• B) between 10% and 20%.
• C) between 20% and 50%.
• D) 10% or more.

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Definitions:

Put Option

An agreement in finance that permits the owner to sell a predetermined quantity of a basic asset at an agreed price during an established timeframe, without being compelled to do so.

Protective Put

An options strategy where an investor purchases a put option for an existing stock position to limit potential losses.

Listed Put Option

A put option that is traded on an official exchange, giving the holder the right but not the obligation to sell a specific asset at a set price before the option expires.

Exercise Price

The price at which the holder of an options contract can buy or sell the underlying asset.