TABLE 8.1 Use the Table to Answer Following Question(s)

question 27

Multiple Choice

TABLE 8.1
Use the table to answer following question(s) .
April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts) .
-Refer to Table 8.1. The exercise price of ________ giving the purchaser the right to sell pounds in June has a cost per pound of ________ for a total price of ________.

• A)1460; 0.68 cents; $425.00
• B)1440; 1.06 cents; $662.50
• C)1450; 1.02 cents; $637.50
• D)1440; 1.42 cents; $887.50

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Definitions:

Decision Tree

A graphical representation of choices and their potential outcomes, including chance event outcomes, resource costs, and utility.

Expected Value Criterion

A decision-making approach based on the weighted average of all possible outcomes, with each outcome's weight being its probability of occurrence.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor costs.

Setup Cost

The cost to prepare a machine or process for production.