Fred Bought 600 Shares of Edgewood Stock at a Price

question 57

Multiple Choice

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a share. To protect his profits, Fred should buy

• A) 600 call options with a strike price of $55.
• B) 600 put options with a strike price of $50.
• C) 6 call options with a strike price of $55.
• D) 6 put options with a strike price of $50.

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into full units of output for reporting purposes.

Work in Process Inventory

Items that are partway through their manufacturing process but have not yet reached their final form.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, measured in terms of the amount of finished goods those partial items represent.

Weighted Average Method

A cost accounting method that calculates the cost per unit of inventory by considering the weight of each period’s inventory cost.