A Put Option on a Stock Has an Exercise Price

question 22

Multiple Choice

A put option on a stock has an exercise price of $42.If the stock price at expiration is $35,what is the option payoff for a short put position?

• A)$0
• B)$7
• C)-$7
• D)$35
• E)-$35

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Definitions:

FVTPL

Fair Value Through Profit or Loss, a classification under IFRS for financial instruments measured at their fair value with changes recognized in the profit or loss.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity without controlling it.

Investment Account

An account held at a financial institution that contains securities, cash, and other assets that an individual or entity invests in.

Purchase Price Discrepancy

Differences between the provisional purchase price initially recorded at the time of acquisition and the final purchase price determined after valuation adjustments.