Bob's DJIA Index Option Had a Strike Price of 125

question 84

Multiple Choice

Bob's DJIA Index option had a strike price of 125. When he exercised the option, the Dow was at 13,050.

• A) Bob received $5,500 from the writer of the contract.
• B) Bob paid $550 to the writer of the contract.
• C) Bob received $550 from the writer of the contract.
• D) Bob received $55,000 from the writer of the contract.

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Definitions:

Minimum Price

The lowest price at which a product or service can be sold, often set to cover costs or comply with legal requirements.

Machine Hours

A measure of the operating time of machinery used in production, commonly applied in calculating depreciation or allocating overhead.

Constrained Resource

Refers to the limited capacity or resources a company has which can restrict its ability to produce goods or services.

Profitable Use

The effective and efficient utilization of resources or assets to generate maximum profit.