On 1 January 2017, Peter Ltd Signed a Contract Worth

question 15

Multiple Choice

On 1 January 2017, Peter Ltd signed a contract worth $64 000 000 to construct the Cycling Stadium. The stadium was to be built over three years, with progress payments as follows: Estimated costs were $50 000 000. The project was 35 per cent complete at the end of 2017, 75 per cent complete at the end of 2018 and 100 per cent complete at the end of 2019. Revenues and costs were as estimated. How much profit was earned during 2019 if the percentage of completion method was used?

• A) $3 500 000
• B) $5 600 000
• C) $14 000 000
• D) None of the above

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Definitions:

Call

An option contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specified time.

Positive Intrinsic Value

The condition where an option or other financial instrument has a market price below its calculated value, suggesting undervaluation.

In-the-Money

An option is considered in-the-money when it has intrinsic value, meaning that for a call option the market price of the asset is above the strike price, and for a put option, it's below the strike price.

Strike Price

The fixed price at which an option's holder has the right to purchase (if a call option) or sell (if a put option) the underlying asset or commodity.