It May Be Advantageous to Exercise a Put Option

question 64

Multiple Choice

It may be advantageous to exercise a put option

• A) early if it is in the money.
• B) early if it is out of the money.
• C) only on the expiration date.
• D) if the price of the put is below the intrinsic value.

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Definitions:

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to reflect cash transactions.

Comparative Balance Sheets

Financial statements that present the assets, liabilities, and shareholders' equity of a company at different points in time for comparison.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Equipment

Assets used in the operations of a business that have a longer-term use, such as machinery, office furniture, and computers, which are subject to depreciation over their useful lives.