Mark Owns Both a March $20 Put and a March

question 10

Multiple Choice

Mark owns both a March $20 put and a March $20 call on Alpha stock. Which one of the following statements correctly relates to Mark's position? Ignore taxes and transaction costs.

• A) A price decrease in Alpha stock will increase the value of Mark's call option.
• B) A March $30 call is worth more than Mark's $20 call.
• C) The time premium on an April $20 put is less than the time premium on Mark's put. (Assume both puts expire in the same calendar year.)
• D) A price increase in Alpha stock from $26 to $28 will increase the value of Mark's put.
• E) If the intrinsic value of Mark's put increases by $1 then the intrinsic value of his call must either decrease by $1 or equal zero.

Understand the adjustments to Cost of Goods Sold based on standard cost variances.

Gain insights into the management of variances in fixed manufacturing overhead.

Understand the impact of recording direct labor costs on the Work in Process inventory account.

Recognize the accounting entries related to the purchase of raw materials.

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Definitions:

Sample Size

The number of observations or individuals included in a sample from a population for the purpose of statistical analysis.

Type II Error

A statistical error that occurs when a false null hypothesis is not rejected, also known as a false negative.

Not Guilty

A legal declaration that a defendant has not been proven to have committed the charges against them beyond a reasonable doubt.

Hypothesis Test

A method in statistics to determine whether there is enough evidence in a sample of data to infer that a certain condition is true for the entire population.