Ten Put Option Contracts Are Written with a Strike Price

question 111

Multiple Choice

Ten put option contracts are written with a strike price of $95 and an option premium of $3.87. If the stock price at expiration is $88.16, what is the profit from this transaction?

• A) $710
• B) $3,870
• C) $2,430
• D) -$3,160
• E) -$2,970

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Definitions:

Allowance for Doubtful Accounts

An accounting provision representing the estimated amount of receivables that may not be collected, reducing the accounts receivable balance to its net realizable value.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal, used in valuing inventory and accounts receivable for financial reporting.

Write-Off

A write-off involves removing an asset from the financial statements because it is no longer collectible or has no value.

Bank Reconciliation

Bank reconciliation involves the process of matching and comparing the account balance in an entity's financial records to the corresponding information on a bank statement, to ensure accuracy and consistency.