A 3-Month Put Has a Strike Price of $50 and an Option

question 80

Multiple Choice

A 3-month put has a strike price of $50 and an option premium of $3.10. The underlying stock is selling for $47.80 per share. What is the time value of the put?

• A)$0
• B)$.60
• C)$.90
• D)$1.10
• E)$2.20

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Definitions:

Unit Cost

The cost incurred to produce, purchase, or acquire a single unit of a product or service.

FIFO Costing

An inventory valuation method where the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.

Gross Profit

The difference between sales revenue and the cost of goods sold (COGS), indicating the profitability of a company's core business activities.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor involved.