Using the Data for the Problem, Assume That You Entered

question 39

Multiple Choice

Using the data for the problem, assume that you entered into an option with Goldman Sachs for one contract worth £75,000 at a premium of $.0325, a strike price of 162 and a brokerage fee of $25 to get into the option and also to exercise the option. Would you exercise the option?

• A) yes
• B) no
• C) It depends on the June 1 spot rate.
• D) This is not an appropriate situation for an option.

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Definitions:

Merchandiser's Budget

A financial plan used by a retail company to manage inventory, purchase goods, and forecast sales for planning profits and cash flow.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor costs.

Production Budget

An estimate of the total cost of production, including raw materials, labor, and overhead, for a specific period.

Direct Materials

Raw materials that can be directly traced to the production of a specific product and are a significant portion of the product cost.