You Sold Ten Put Option Contracts on PLT with an Exercise

question 35

Multiple Choice

You sold ten put option contracts on PLT with an exercise price of €32.50 and an option price of €1.10.Today,the option expires and the underlying share is selling for €34.30 a share.Ignoring trading costs and taxes,what is your total profit or loss onthis investment?

• A)-€2,900
• B)-€1,100
• C)€700
• D)€1,100
• E)€2,900

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Definitions:

Recorded

The act of entering financial transactions into the accounting records of a company.

Effective-Interest Method

A way of calculating the amortized cost of a bond and of allocating interest expense over the bond's life, reflecting the actual interest rate earned.

Discount on Bonds Payable

The difference between the face value of a bond and its selling price, when sold for less than its face value.