Exhibit 20.5 Use the Information Below for the Following Problem(S)

question 59

Multiple Choice

Exhibit 20.5
Use the Information Below for the Following Problem(S)
Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share.
-Refer to Exhibit 20.5.If at expiration Peppy is selling for $42.00,what is Sarah's dollar gain or loss?

• A) $420 gain
• B) $420 loss
• C) $475 loss
• D) $475 gain
• E) None of the above

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Definitions:

Airplane Mode

A setting on electronic devices that disables its wireless communication functions to prevent interference with aircraft operation and other equipment.

Wireless Communications

The transfer of information between two or more points without the use of electrical conductors or wires.

Internet Access Provider

A company or organization that offers services for connecting to the internet, including broadband, dial-up, and wireless connections.

Modem

A device that modulates and demodulates signals for data transmission over telephone lines or other communication mediums.