On December 1,20X8,Winston Corporation Acquired 10 Deep Discount Bonds from Linked

question 57

Multiple Choice

On December 1,20X8,Winston Corporation acquired 10 deep discount bonds from Linked Corporation at a cost of $400 per bond.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 10 bonds at $400 per bond.The option expires on February 20,20X9.Selected information concerning the fair values of the investment and the options follow:
Assume that Winston exercises the put option and sells Linked bonds on February 20,20X9.
-Based on the preceding information,what is the market price of Linked Corporation bonds on February 20,20X9?

• A)$350
• B)$370
• C)$360
• D)$400

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Definitions:

Total Proceeds

The entire sum of money received from a transaction or series of transactions, often before any deductions or expenses are taken into account.

Sustaining Stock Price

Efforts or strategies employed by a corporation to maintain or support the current market price of its shares.

Excess Cash

The amount of cash available exceeding what is necessary for day-to-day operations, often allocated for investment or returned to shareholders.

Business Relationships

The connections and interactions between a company and its customers, suppliers, partners, and other entities essential for its operation.