Suppose That a Stock Sells at a Price of $40

question 26

Multiple Choice

Suppose that a stock sells at a price of $40 on the expiration date. Compute the payoff to the seller of a put option if the option strike price is $50.

• A) -$20
• B) -$10
• C) 0
• D) $40

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Definitions:

Accounts Payable Turnover Ratio

A financial efficiency ratio that measures how many times a company pays off its suppliers during a specific period.

Interest Expense

The cost incurred by an entity for borrowed funds, shown as an expense on the income statement.

Interest Payable

A liability account representing the amount of interest expense that has been incurred but not yet paid by the company.

Current Liability

A liability that is expected to be paid off within a year's time or within the normal operating cycle of a business.