USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 48

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

-Refer to Exhibit 16.1. If the spot rate at expiration is $0.90 and the call option was purchased, what is the dollar gain or loss?

• A) $0
• B) $3750 gain
• C) $3660 gain
• D) $4650 loss
• E) $2680 loss

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Definitions:

Governmental Services

Services provided by the government to its citizens; these can include education, healthcare, and public safety.

Ability-to-Pay Principle

A tax principle suggesting that taxes should be levied based on the taxpayer's ability to pay, where those with higher income or wealth should pay more taxes.

Tax Burdens

The measure of the financial impact of taxes on individuals, households, or businesses, typically reflecting the total taxes paid as a percentage of income.

Taxation Theory

The study of how taxes affect the economy, focusing on the optimal design of tax policies to achieve various economic objectives.