State the Dollar Amount of Margin You Are Required to Keep

question 8

Multiple Choice

State the dollar amount of margin you are required to keep with a broker when selling two call options on Your Beloved Machine with strike price $105 when the current stock price of YBM is $104,the call price is $4,and each call is on 100 shares.The rule for margin (borrowing) requirement for option writing as set by the Federal Reserve Bank is as follows: for writers of call options on equity and "narrow-based index," the margin account initial requirement is 100 percent of option proceeds plus 20 percent of underlying security/index value less out-of-the-money amount,if any,to a minimum of option proceeds plus 10 percent of underlying security/index value for calls.

• A) $2,080
• B) $2,880
• C) $4,160
• D) $4,760
• E) None of these answers are correct.

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Definitions:

Ethical Sales Manager

A sales manager who adheres to and promotes ethical practices and integrity in all sales activities and interactions.

Pre-Conventional Stage

A level in Kohlberg's theory of moral development where an individual's sense of morality is externally controlled and rules are obeyed to avoid punishment.

Morality

Principles concerning the distinction between right and wrong or good and bad behavior.

Territories

Geographically defined areas or domains, often used to assign sales regions or political boundaries.