You Own 300 Shares of Delta Stock Which Is Currently

question 65

Multiple Choice

You own 300 shares of Delta stock which is currently worth $42 a share.You just paid an option premium of $0.70 to buy three put contracts on this stock with a strike price of $40.What is the maximum loss per share you are avoiding by purchasing the option contract?

• A) $40.00
• B) $42.85
• C) $44.15
• D) $47.00
• E) $53.85

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Definitions:

Declining-Balance Method

Depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the useful life of the asset.

Accelerated Depreciation

A method of depreciation that allows larger depreciation expenses in the early years of an asset's life and smaller expenses in the later years.

Useful Life

The estimated period over which a fixed asset is expected to be usable by a company, influencing depreciation calculations.

Plant Asset

A plant asset is a long-term tangible asset used in the operation of a business that is not intended for resale, such as machinery, buildings, and equipment.