Corine Ltd,a Trader Bought a December Put Option for 10 $$\$ 100000$$

question 12

Multiple Choice

Corine Ltd,a trader bought a December put option for 10 $100 000 10% treasury bonds at a premium of $3.95 on January 1,2010.Year end for Corine is 30 June when the price for a December put option for $$\$ 100000$$ 10% treasury bonds is $3.50.On 31 July 2010,Corine Ltd sold the option for $4.00.What are the journal entries to record this transaction?

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Definitions:

Stated Rate

The interest rate declared on a financial instrument, such as a bond or loan, without adjusting for compounding or fees.

Compounded Annually

A method of calculating interest where the interest earned or paid is added to the principal, resulting in interest on interest in subsequent periods.

Effective Rate

The interest rate on a loan or financial product, adjusted for the effect of compounding over a given period.

Loan Proceeds

The amount of money that is disbursed to the borrower from the lender minus any fees or costs associated with the loan.