If a Microsoft January 20 Put Option with a Strike

question 138

Multiple Choice

If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and the market price of the underlying Microsoft stock was $18.00, the price of the put option would be _______________.

• A)in-the-money
• B)out-of-the-money
• C)fairly priced
• D)not enough information to tell

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Definitions:

Residual Value

Residual value is the estimated value that an asset will have at the end of its useful life, crucial in leasing and depreciation calculations.

Reduce Uncertainty

Strategies or actions taken to minimize the unpredictability or variability in outcomes.

Leasing

A financial arrangement where a lessee pays the lessor for the use of an asset for a specified period of time, without owning the asset.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.