You Bought a Call Option with a Strike Price of $40

question 95

Multiple Choice

You bought a call option with a strike price of $40. What is your total payoff on this option contract if the underlying stock is selling for $42.70 on the option expiration date?

• A)$3
• B)$70
• C)$133
• D)$233
• E)$270

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Definitions:

Forming

A manufacturing process that involves shaping and combining materials to create a product.

Customizing

The process of modifying products or services to meet specific customer needs or preferences.

Traditional Costing

A costing method used for expense allocation in which the cost of products is based on the amount of manufacturing-related resources they consume, without differentiating between fixed and variable costs.

Activity-Based Costing

A costing method that identifies the activities in an organization and assigns the cost of each activity according to the actual consumption by each.