Suppose That a Stock Sells at a Price of $60

question 35

Multiple Choice

Suppose that a stock sells at a price of $60 on the expiration date. Compute the payoff to the seller of a put option if the option strike price is $20.

• A) -$20
• B) -$10
• C) 0
• D) $40

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Contribution Format

A type of income statement where costs are segregated into variable and fixed, highlighting the contribution margin.

Contribution Margin Ratio

The ratio of Contribution Margin to Sales Revenue, indicating the percentage of each sales dollar remaining after variable costs are deducted.

Contribution Format

An income statement format that separates fixed costs from variable costs to highlight the contribution margin.