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

question 35

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 long strap position be if the stock price at expiration is $35?

• A)-$1.15
• B)-$2.30
• C)$1.15
• D)$2.30
• E)$5.20

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Definitions:

Restocking Costs

Restocking costs are expenses associated with replenishing inventory, including purchasing, shipping, handling, and storage costs.

Carrying Cost

The total cost of holding a particular inventory, including storage, insurance, depreciation, and opportunity costs.

Variable Cost

Costs that change in proportion to the level of goods or services produced by a business.

Accounts Receivable Approach

The accounts receivable approach is a method used in financial analysis to estimate the impact of credit sales and receivables on a company's cash flow and profitability.