Bingo,Inc ,Enters into a Call Option Contract with Racer Investment

question 60

Multiple Choice

Bingo,Inc. ,enters into a call option contract with Racer Investment Co.on January 2,2014.This contract gives Bingo the option to purchase 1,000 shares of Saloon stock at $100 per share.The option expires on April 30,2014.Saloon shares are trading at $100 per share on January 2,2014,at which time Bingo pays $100 for the call option.Assume that the price per share of Saloon stock is $115 on April 30,2014,and that the time value of the option has not changed.In order to settle the option contract,Bingo,Inc. ,would most likely

• A) pay Racer Investment $15,000.
• B) purchase the shares of Saloon at $100 per share and sell the shares at $115 per share to Racer.
• C) receive $15,000 from Racer Investment.
• D) receive $400 from Racer Investment.

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Definitions:

Financing Statement

A document filed to give public notice of a security interest in personal property, securing payment or performance of an obligation.

Ordinary Course

An action or routine that falls under the usual and customary conduct of a business or an individual’s daily activities.

Security Interest

A legal claim or right on assets granted to a creditor to secure the repayment of a debt.

Car Buyer

An individual or entity that purchases a vehicle for personal use, commercial use, or resale.