You Are Fortunate Enough to Own a Put Option with a Strike

question 20

Multiple Choice

You are fortunate enough to own a put option with a strike price of $40 on the stock of Osmerc, Inc. The current stock price is $3. When the option expires, you expect the stock price to be either $2 or $5. Assume the risk-free rate of interest is zero. What is the value of your option?

• A) $0
• B) $35
• C) $37
• D) $46

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Definitions:

Sole Proprietorship

A business structure where a single individual owns, manages, and is responsible for all aspects of the business, including its debts.

Closed Receivership

A legal process where a receiver is appointed to manage the affairs, assets, and liabilities of a distressed or insolvent company until a resolution is found.

Controller

A senior financial officer responsible for overseeing an organization's daily accounting operations.

Capital Expenditures

Capital employed by a business to buy, enhance, and keep up physical properties, including premises, manufacturing facilities, or devices.