Exhibit 13-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 37

Multiple Choice

Exhibit 13-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
On the last day of October, Bruce Springsteen is considering the purchase of 100 shares of Olivia Corporation common stock selling at $37 1/2 per share and also considering an Olivia option. $\begin{array}{lllll}&\quad\quad\quad\text { Calls } && \quad\quad\quad\quad\text { Puts }\\\hline\text { Price } & \text { December } & \text { March } & \text { December } & \text { March } \\\hline 35 & 33 / 4 & 5 & 11 / 4 & 2 \\40 & 21 / 2 & 31 / 2 & 41 / 2 & 43 / 4\end{array}$
-Refer to Exhibit 13-3. If Bruce buys a March put option with an exercise price of 40, what is his dollar gain (loss) if he closes his position when the stock is selling at 43 1/2?

• A) $825.00 loss
• B) $475.00 loss
• C) $350.00 loss
• D) $25.00 loss
• E) He has a gain

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Definitions:

Income Tax Withholding

The process by which employers withhold a portion of employees' salaries or wages to pay directly to the government as an advance payment of income tax.

Payroll Tax Expense

Taxes that are incurred by an employer based on the wages and salaries paid to employees, including social security taxes, Medicare taxes, and unemployment taxes.

FICA Taxes

Federal taxes in the United States that fund Social Security and Medicare, required to be withheld from employees' paychecks.

State Income Taxes

State-specific levies on the earnings of individuals and businesses within their territories.