On May 1, 20x1, Ustar Purchased a Put Option to Sell

question 44

Multiple Choice

On May 1, 20x1, Ustar purchased a put option to sell £50,000 on April 30, 20x2 at a strike price equal to $2, which was the spot rate on May 1, 20x1.Ustar paid a premium of $0.01 per pound.How should the option be recorded on May 1, 20x1?

• A)Debit Foreign Currency Option for $100,500.
• B)Credit Foreign Currency Option for $100,500.
• C)Debit Foreign Currency Option for $500.
• D)Debit Hedge Expense for $500.

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Definitions:

Gallbladder

A small, pear-shaped organ located beneath the liver, storing and concentrating bile produced by the liver before releasing it into the small intestine.

Glycogen

A multi-branched polysaccharide of glucose that serves as a form of energy storage in animals, fungi, and bacteria.

Appendix

A small, tube-like sac attached to the large intestine, its function is not entirely understood, but it is known to play a role in gut immunity.

Large Intestine

The final section of the gastrointestinal tract that processes waste material and absorbs water and electrolytes, leading to the formation of stool.