Karl Is Scheduled to Receive an Annuity Distribution of $10,000

question 48

Multiple Choice

Karl is scheduled to receive an annuity distribution of $10,000 from his pension plan in 2013.Due to his recent success in the stock market,he has requested that he receive only $5,000 in 2013.Because Karl will fail to receive the required annuity distribution in 2013,he is subject to a penalty of

• A)$ -0-
• B)$ 500
• C)$1,000
• D)$2,500
• E)$5,000

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Definitions:

Exercise Price

The price at which the holder of an option contract may buy (in the case of a call option) or sell (in the case of a put option) the underlying asset when the option is exercised.

Underlying Asset

The financial asset upon which derivative instruments, such as futures, options, or warrants, are based or derived from.

European Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a set price on a specific expiration date, only exercisable at the end of its term.

Expiration Date

The specific date upon which an options or futures contract becomes void and the holder must execute or relinquish the contract.