Corine Ltd,a Trader Bought a December Put Option for 10

question 23

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 $100 000 10% treasury bonds is $3.50.
What would be the journal entry for 30 June 2010?

• A)
• \(\begin{array}{llr}
• \text { Dr Loss on options contract } &\$4500\\
• \text { \( \mathrm{Cr} \) Investment in options contract } &&\$4500\\
• \end{array}\)
• B)
• \(\begin{array}{llr}
• \text { Dr Loss on options contract } &\$450\\
• \text { \( \mathrm{Cr} \) Investment in options contract } &&\$450\\
• \end{array}\)
• C)
• \(\begin{array}{llr}
• \text { Dr Investmentin options contract} &\$4500\\
• \text {Cr Gain on options contract } &&\$4500\\
• \end{array}\)
• D)
• \(\begin{array}{llr}
• \text { Dr Investmentin options contract} &\$450\\
• \text {Cr Gain on options contract } &&\$450\\
• \end{array}\)

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Definitions:

Marginal Products

This refers to the additional output that results from using an extra unit of a particular input, assuming other inputs are constant in the production process.

Production Function

A mathematical expression that describes the relationship between input factors and the output of goods or services.

Returns To Scale

The change in output of a production process as all inputs are increased proportionally.

Marginal Product

The additional output that is produced by using one more unit of a particular input, holding the levels of all other inputs constant.