When an Investment in a Held-To-Maturity Security Is Transferred to an Available-For-Sale

question 36

Multiple Choice

When an investment in a held-to-maturity security is transferred to an available-for-sale security, the carrying value assigned to the available-for-sale security should be

• A) its original cost.
• B) its fair value at the date of the transfer.
• C) the lower of its original cost or its fair value at the date of the transfer.
• D) the higher of its original cost or its fair value at the date of the transfer.

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Definitions:

At-the-money

A term used in options trading to describe an option where the market price of the underlying asset is equal to the option's strike price.

Straddle Position

An investment strategy involving the purchase or sale of both a call option and a put option on the same asset, with identical strike prices and expiration dates, used to bet on volatility.

Delta-hedging

A strategy used in options trading to reduce the risk of price movements of the underlying asset by offsetting positions.

Options Sellers

Parties in an options contract who take on the obligation to buy or sell the underlying asset if the options buyer exercises their right.