You Own 7,500 Shares of GO Stock Which Is Currently

question 4

Multiple Choice

You own 7,500 shares of GO stock which is currently valued at $47 a share.The $50 put has a premium of $2.50 and a put delta of -.60.What position should you take in $50 put contracts to hedge your stock against a $1 decrease in price?

• A)buy 125 contracts
• B)buy 1,250 contracts
• C)buy 12,500 contracts
• D)write 125 contracts
• E)write 1,250 contracts

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Definitions:

Activity Rate

The predefined cost-driver rate used in Activity-Based Costing to allocate overhead costs to products or services, based on each activity’s usage by those products or services.

Activity Cost Pool

A collection of overhead costs attributed to particular activities, used in activity-based costing to allocate costs more accurately to products or services.

Activity-Based Costing

A costing method that assigns costs to products and services based on the activities and resources that go into producing them, aiming to provide more accurate cost information.

Overhead

General business expenses that are not directly tied to specific products or services but are necessary for the overall operation of a business, such as rent, utilities, and administrative costs.