USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 16

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
On the last day of October, Bruce Springsteen is considering the purchase of 100 shares of Olivia Corporation common stock selling at $37 1/2 per share and is considering an Olivia option.

-Refer to Exhibit 14.1. If Bruce buys a March put option with an exercise price of 40, what is his dollar gain (loss) if he closes his position when the stock is selling at 43 1/2?

• A) $825.00 loss
• B) $475.00 loss
• C) $350.00 loss
• D) $25.00 loss
• E) $50.00 gain

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Definitions:

Economies Of Scope

Cost advantages that a business experiences by producing a variety of products rather than specializing in a single product or service.

Economies Of Scope

Cost advantages that a business obtains through a variety of products rather than specializing in a single product.

Synergy

The concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts.

Cost Complementarity

Occurs when the cost of producing one good decreases with the increase in production of another good, showing a synergy between the production processes of two goods.