A Stock Is Selling at $85 at the Expiration of an Option

question 13

Multiple Choice

A stock is selling at $85 at the expiration of an option contract. Which one of the following options on the stock will most likely be exercised?

• A) Call option with exercise price of $65
• B) Put option with exercise price of $65
• C) Call option with exercise price of $85
• D)Put option with exercise price of $85

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Definitions:

Overhead Cost

Indirect expenses related to the day-to-day operations of a business, such as rent, utilities, and administrative salaries.

Work in Process Inventory

Goods that are in the process of being produced but are not yet finished products in manufacturing.

Prime Costs

Prime costs are the direct costs of production, including direct materials and direct labor, but excluding indirect expenses like manufacturing overhead.

Conversion Costs

The costs incurred to convert raw materials into a finished product, including labor and manufacturing overhead expenses.