Exhibit 20 -Refer to Exhibit 20

question 81

Multiple Choice

Exhibit 20.3
Use the Information Below for the Following Problem(S)
On the last day of October, Bruce Springsteen is considering the purchase of 100 shares of Olivia Corporation common stock selling at $37 1/2 per share and also considering an Olivia option.
$\begin{array}{lcccc} &\quad\quad\quad\quad\quad\quad\quad\quad {\text { Calls }} &&\quad\quad\quad\quad\quad\quad\quad\quad {\text { Puts }} \\\text { Price } & \text { December } & \text { March } & \text { December } & \text { March } \\\hline 35 & 3\quad3 / 4 & 5 & 1\quad1 / 4 & 2 \\40 & 2\quad1 / 2 & 3\quad1 / 2 & 4\quad1 / 2 & 4\quad3 / 4\end{array}$
-Refer to Exhibit 20.3.If Bruce buys a March put option with an exercise price of 40,what is his dollar gain (loss) if he closes his position when the stock is selling at 43 1/2?

• A) $825.00 loss
• B) $475.00 loss
• C) $350.00 loss
• D) $25.00 loss
• E) He has a gain

---

Definitions:

Asset Beta

A measure used in finance to determine the risk of an asset in relation to the market, isolated from its financial leverage.

Market Rate

The prevailing price or cost of goods, services, or labor in a competitive market, determined by supply and demand forces.

Risk-Free Rate

The return on an investment with no risk of financial loss, often represented by the yield on government bonds.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from the central bank or the rate used in discounted cash flow analysis to determine the present value of future cash flows.