Exhibit 22.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 105

Multiple Choice

Exhibit 22.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00.
-Refer to Exhibit 22.7. What would the net value of a short straddle position be if the stock price at expiration is $35?

• A)-36.15
• B)-7.15
• C)-$1.15
• D)$1.15
• E)$7.15

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Definitions:

Process Costing System

An accounting method used for homogenous products, allocating production costs based on the processes or departments through which the products pass.

Work in Process Inventory

Items that are in the process of being produced but are not yet complete.

Raw Materials Inventory

The total cost of all the materials that are held by an organization and that will be used in production to create goods.

Process Costing System

An accounting method used to determine the cost of producing products in continuous processes where the units are indistinguishable from each other.