You Enter into an Exchange Option Contract Where You Have $- 30$

question 14

Multiple Choice

You enter into an exchange option contract where you have the right to give up 5 shares of IBM stock in exchange for one share of Google in three months. After three months, IBM is trading at $92 per share while Google is at $430. The payoff at maturity is

• A) \(- 30\) .
• B) Zero.
• C) \(+ 6\) .
• D) \(+ 30\) .

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Definitions:

Financing Activities

Transactions and events where a company either raises funds through borrowing or repaying debts, or issues and repurchases its own shares.

Order of Presentation

the sequence in which financial information is organized and presented in financial statements, typically following accounting standards or regulations.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

Cheques Outstanding

Cheques that have been written and recorded in the payer's accounting system but have not yet been cashed or cleared by the receiving bank.