You Are Cautiously Bullish on the Common Stock of the Wildwood

question 32

Multiple Choice

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:
-To establish a bull money spread with calls you would _______________.

• A) buy the 55 call and sell the 45 call
• B) buy the 45 call and buy the 55 call
• C) buy the 45 call and sell the 55 call
• D) sell the 45 call and sell the 55 call

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Definitions:

Product Costs

Product costs are the costs directly associated with the creation of a product, including material, labor, and overhead expenses.

Absorption Costing

A bookkeeping approach that encompasses all costs associated with production, including direct materials, direct labor, along with both variable and fixed overhead expenses, into the product's cost.

Product Cost

The total expense incurred to produce and prepare a product for sale, including direct materials, labor, and overhead.

Unit Costs

The cost incurred by a company to produce, store, and sell one unit of a particular product or service.