Exhibit 22.7 Use the Information Below for the Following Problem(S)

question 66

Multiple Choice

Exhibit 22.7
Use the Information Below for the Following Problem(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00.
-Refer to Exhibit 22.7.What would the net value of a long straddle position be if the stock price at expiration is $35?

• A) -7.15
• B) -$1.15
• C) $1.15
• D) $7.15
• E) $36.15

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Definitions:

Buying Division

A segment within a company responsible for purchasing goods, materials, and services from external suppliers.

Transfer Prices

Prices used for the sale of goods or services between departments or subsidiaries within the same company, often set to comply with tax laws.

Multinational Company

A corporation that operates in multiple countries beyond its home country, typically having a centralized headquarters but decentralized operations.

Tax Rates

The fraction of earnings taken as tax from a person or corporation by the authorities.