You Wrote Ten Call Option Contracts on JIG Stock with a Strike

question 18

Multiple Choice

You wrote ten call option contracts on JIG stock with a strike price of $41 and an option price of $.60.What is your total profit on this investment if the price of JIG is $46.05 on the option expiration date?

• A)−$5,050
• B)−$4,450
• C)$4,100
• D)$4,450
• E)$5,050

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Definitions:

MACRS

The Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes allowing for faster recovery of assets' costs to stimulate investment.

Straight-Line Depreciation

An approach to spreading the expense of a tangible asset across its lifespan in uniform yearly sums.

Income Taxes

Taxes levied by governments on the income generated by businesses or individuals within their jurisdiction.

Changing Depreciation Methods

The process of altering the accounting method used to allocate the cost of a tangible asset over its useful life for financial reporting purposes.