On January 10, 2017, Wally Sold an Option for $2,000

question 3

Essay

On January 10, 2017, Wally sold an option for $2,000 on vacant land he held as an investment. He had purchased the land in 2013 for $76,000. The option allowed the option holder to purchase the property for $122,000 plus the cost of the option. On March 1, 2017, the option holder exercised the option. What is the amount and nature of Wally's gain or loss from disposition of the land?

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Definitions:

Oats

A species of cereal grain grown for its seed, which is known for its health benefits and is used as livestock feed, oatmeal, and oat milk.

Absolute Advantage

The ability of a country or entity to produce a good using fewer resources than another producer, indicating higher efficiency.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than its competitors, leading to more efficient trade benefits.

Opportunity Cost

The forfeiting of possible gains that could be obtained from exploring other options, when one is chosen.