Exhibit 13-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 95

Multiple Choice

Exhibit 13-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share.
-Refer to Exhibit 13-5. What is Sarah's annualized gain/loss?

• A) 60.60% gain
• B) 6.06% loss
• C) 60.60% loss
• D) 6.06% gain
• E) None of the above

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Definitions:

Lessee

An individual or entity that leases or rents an asset from its owner, known as the lessor.

Captive Finance Company

Wholly owned subsidiary that handles credit extension and receivables financing through commercial paper.

Wholly Owned Subsidiary

A company whose entire stock is held by another company, making it completely controlled by the parent company.