Calculate the Value of a Short Put If the Exercise

question 7

Multiple Choice

Calculate the value of a short put if the exercise price is $10.00,the premium is $1.50 and the spot price is $8.00,given V = P - max(X-S,0) .

• A) -$1.50
• B) -$0.50
• C) $0.00
• D) $0.50

---

Definitions:

Gross Method

An accounting practice where purchases are recorded at their full invoice price without deducting any purchase discounts taken.

Periodic Method

An accounting method where inventory purchases are recorded in a purchases account, with the inventory count and cost of goods sold calculated at the end of the accounting period.

Discounts Lost

A financial metric indicating the additional cost incurred by failing to take advantage of offered payment discounts by suppliers.

Vouchers Payable

An accounting term used to represent records of transactions or evidence of expenditure awaiting payment.