On December 1,2008,Winston Corporation Acquired 100 Shares of Linked Corporation

question 8

Multiple Choice

On December 1,2008,Winston Corporation acquired 100 shares of Linked Corporation at a cost of $40 per share.Winston classifies them as available-for-sale securities.On this same date,it decides to hedge against a possible decline in the value of the securities by purchasing,at a cost of $250,an at-the-money put option to sell the 100 shares at $40 per share.The option expires on February 20,2009.Selected information concerning the fair values of the investment and the options follow:
Assume that Winston exercises the put option and sells Linked shares on February 20,2009.

-Based on the preceding information,what is the market price of Linked Corporation stock on February 20,2009?

• A)$35
• B)$37
• C)$36
• D)$40

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Definitions:

Linear Perspective

A depth cue that refers to the way parallel lines appear to converge as they recede into the distance.

Monocular

Relating to or involving only one eye.

Pictorial Depth

The aspect of visual perception that allows the observer to perceive depth and three-dimensional structure in two-dimensional images.

Linear Perspective

A technique in art and photography that creates the illusion of depth and distance on a flat surface.