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

---

Definitions:

Cost-Plus Pricing

A pricing strategy where a fixed percentage or amount is added to the cost of producing a product or service to determine its selling price.

Full Cost

The total cost of production that includes both direct and indirect costs, such as raw materials, labor, and overhead.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments.

Total Variable Cost

The cumulative cost that varies directly with the level of production or sales volume.