Buyers of Options Maturing in More Than Nine Months Can

question 5

Multiple Choice

Buyers of options maturing in more than nine months can borrow up to 25 percent of the purchase price,while buyers of shorter maturity options must keep the full purchase price in their margin accounts.If you are buying two contracts of a put option maturing in six months for $6 and three contracts of a call option maturing in ten months for $4,then the minimum amount that you must keep in the margin account is:

• A) $900
• B) $1,200
• C) $2,100
• D) $2,400
• E) None of these answers are correct.

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Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all of the manufacturing costs (direct materials, direct labor, and overhead) in the cost of a product.

Variable Costing

An accounting method that only considers variable costs in the cost of goods sold and is used in internal financial analysis.

Income Statement

A financial document that shows a company's revenues, expenses, and net income over a specific period.

Unit Product Cost

The total cost associated with producing one unit of product, including materials, labor, and overhead.