The Three-Month 90-Strike Call Is Priced at $5 and the Three-Month

question 18

Multiple Choice

The three-month 90-strike call is priced at $5 and the three-month 100-strike call is priced at $3.What is the maximum possible net payoff on a bullish vertical spread using these options?

• A)$5
• B)$7
• C)$8
• D)$10

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Definitions:

Departmental Predetermined Rates

Specific predetermined overhead rates calculated for different departments within a company, to more accurately allocate costs.

Machine-Hours

A measure of production volume in terms of the total hours machines are operated in the manufacturing process.

Departmental Predetermined Rates

Rates used to allocate departmental overhead costs, established in advance based on expected costs and activity levels.

Machine-Hours

A measurement unit representing the operational time of a machine, typically used in manufacturing to allocate costs based on usage.