The Anticipated Purchase of a Fixed Asset for $400,000, with a Useful

question 174

True/False

The anticipated purchase of a fixed asset for $400,000, with a useful life of five years and no residual value, is expected to yield total net income of $200,000 for the five years. The expected average rate of return on investment is 50%.

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Definitions:

Stock Put Option

A financial derivative that gives the holder the right, but not the obligation, to sell a specified quantity of a stock at a set price within a certain time period.

Expiration Time

The specific date and time when an options or futures contract becomes void and the rights to exercise it cease.

Call Contract

An options contract that gives the holder the right to buy an underlying asset at a specified price within a certain period.

Write

In finance, this term often refers to the act of selling a derivative contract, such as an option, thus obligating the writer to fulfill the contract terms if exercised.