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kaheart [24]
3 years ago
12

When an investor buys a call option, regardless of whether it is an Equity or Stock Index option, the maximum risk or loss poten

tial to the investor is the(A)premium that was paid for the contract plus any out-of-the-money amount(B)premium that was paid for the contract less the in-the-money amount(C)premium that was paid for the contract(D)exercise price on the contract plus the premium paid for the contract
Business
1 answer:
kompoz [17]3 years ago
7 0

Answer:

C) premium that was paid for the contract

Explanation:

One interesting feature of buying option is that you can only lose the premium.

For example: If i buy the call option for $5 with a strike price of $30. At the expiration date when the stock price is $22, i would have lost more than $5 by exercising the option. The reason is i am purchasing the stock in $30 which can be bought from market in $22. Here, it would not be the case because unlike futures, options can be left not exercised. So, in this condition i will not exercise the option, and buy the stock from market in $22. Maximum i would lose is the premium that i have paid for the option $5.

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3 years ago
QS 9-9 Recording warranty repairs LO P4 On September 1, Home Store sells a mower (that costs $220) for $520 cash with a one-year
yKpoI14uk [10]

Answer and Explanation:

The journal entries are shown below:

On September 1

Cash $520

      Sales $520

(Being the sale is recorded)

On September 1

Cost of goods sold $220

    To  Merchandise inventory $220

(Being the cost is recorded)

On September 1

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(Being the warranty expense is recorded)

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6 0
3 years ago
The following book and fair values were available for Westmont Company as of March 1.
-BARSIC- [3]

Answer:

DR Inventory                                        $609,000  

     Land                                                 $1,086,750  

     Buildings                                         $2,138,250  

     Customer Relationships                $842,250  

     Goodwill                                           $965,750  

CR Accounts Payable                                           $102,000  

       Common Stock                                                       $56,400

       Additional Paid-In Capital                                     $1,353,600

        Cash                                                                       $4,130,000

Working

Common Stock = 28,200 shares * $2 = $56,400

Additional Paid in Cap = 28,200 shares * ( 50 - 2) = $1,353,600

DR Additional Paid-In Capital                            $32,400

CR Cash                                                                                $32,400

DR Professional Services Expense                   $49,800

CR Cash                                                                                $49,800

8 0
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Answer:

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