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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