You Purchased Four Put Option Contracts with a Strike Price

question 84

Multiple Choice

You purchased four put option contracts with a strike price of $34.5 and a premium of $.85. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $31.50 a share?

• A)$13,460
• B)$13,700
• C)$15,740
• D)$16,340
• E)$16,400

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, granting holders the right to vote at shareholder meetings and receive dividends.

Retained Earnings

The cumulative amount of net income kept in the company to be reinvested in its core business or to pay debt, after paying dividends to shareholders.

Expenses

Expenses are the costs incurred in the process of generating revenue, and they can include items like rent, salaries, and utilities.