Suppose That You Find That YBM's October 100 Put Has

question 9

Multiple Choice

Suppose that you find that YBM's October 100 put has an ask price of $4.10 and a bid price of $4.00.If you want to buy these put options to protect your holding of 400 YBM shares from declining,what is your total cost including commission? Assume that the broker charges a commission equal to a flat fee of $15 plus $2 per contract.

• A) $1,623
• B) $1,647
• C) $1,655
• D) $1,663
• E) None of these answers are correct.

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Definitions:

Disposable Income

The disposable income households have for expenditures and savings, post-income taxation.

C + I

A formula component in macroeconomics representing total private consumption (C) plus total private investment (I).

MPS

The marginal propensity to save, which is the fraction of an additional unit of income that is saved rather than spent.

Expected Rate of Profit

The anticipated return on investment, representing the gain or loss compared to the initial investment amount.