Suppose That a Stock Sells at a Price of $60

question 71

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 $80.

• A) -$20
• B) -$10
• C) 0
• D) $40

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Definitions:

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, which affect the company's capital structure.

Cash Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Operating Activities

Activities directly related to the day-to-day operations of a business, such as selling products, providing services, and paying salaries, which generate cash flows from the primary revenue-producing activities.

Financing Activities

Transactions and events that affect a company's long-term liabilities and equity, such as issuing debt or equity, repaying loans, and paying dividends.