Prepare Journal Entries to Record the Following Transactions Entered into by Valente

question 203

Essay

Prepare journal entries to record the following transactions entered into by Valente Company:
2016
June 1 Received a $10000 12% 1-year note from Andrea Foley as full payment on her account.
Nov. 1 Sold merchandise on account to Patton Inc. for $12000 terms 2/10 n/30.
Nov. 5 Patton Inc. returned merchandise worth $500.
Nov. 9 Received payment in full from Patton Inc.
Dec. 31 Accrued interest on Foley's note.
2017
June 1 Andrea Foley honored her promissory note by sending the face amount plus interest. No interest has been accrued in 2017.

Analyze the impact of various factors (e.g., dividend policies, level of interest rates, time to expiration, stock price volatility) on the value of call and put options.

Calculate and interpret the exposure of portfolios that include stock and options to changes in stock price.

Identify and apply the relationship between call and put hedge ratios.

Understand the concept of delta neutrality and its implications for portfolio management.