Exhibit 22.3 Use the Information Below for the Following Problem(S)

question 53

Multiple Choice

Exhibit 22.3
Use the Information Below for the Following Problem(S)
A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk free rate is 3% over this time period, and the expected volatility is 0.35.
-Assume that you have just sold a stock for a loss at a price of $75,for tax purposes.You still wish to maintain exposure to the sold stock.Suppose that you sell a put with a strike price of $80 and a price of $7.25.Calculate the effective price paid to repurchase the stock if the price after 35 days is $85.

• A) $77.75
• B) $87.25
• C) $82.25
• D) $72.75
• E) None of the above.

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Definitions:

Dr. Francis Townsend

Dr. Francis Townsend was an American physician who was best known for his advocacy of the Townsend Plan, a proposal that led to the creation of the Social Security system in the United States, aimed at supporting the elderly through pensions.

Supreme Court

The highest federal court in the United States, with ultimate appellate jurisdiction over all federal and state court cases involving issues of federal law.

United States v. Butler

A 1936 Supreme Court case that ruled the Agricultural Adjustment Act (AAA) unconstitutional, challenging the limits of federal power in regulatory and taxing activities.