Dapper Hat Makers Is in the Business of Designing and Producing

question 104

Multiple Choice

Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $250 per week. If the employees make 50 derbies in one week, what is the fixed cost per derby? (Round to two decimal places where necessary.)

• A) $4.50
• B) $5.00
• C) $10.00
• D) $14.50

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Definitions:

Volatility

The degree of variation of a trading price series over time, often used to gauge the risk in investments.

Put-call Parity

A principle in options pricing that shows the relationship between European put and call options with the same strike price and expiration date.

Risk-free Rate

The risk-free rate is the theoretical return of an investment with zero risk, representing the interest an investor would expect from an absolutely risk-free investment over a specified period.

Exercise Price

Also known as the strike price, it is the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.