Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![3. X transfers a publicly traded marketable
equity security to Y with a date-of transfer
price equal to $25. For each of the following
transfer provisions [considered
independently],
identify the affected
condition (#1, 2 or 3) for sale accounting and
whether the provision prevents sale
accounting for the transfer.
A) A legal letter included a "would" opinion
stating that the security would be beyond the
reach of the powers of a bankruptcy trustee
of X. Thus, the transferred asset is isolated
from X.
B) Y may sell the security to a third party. In
the event when X exercise a call option to
buy back the security, Y may purchase the
same security from the open market as a
replacement.
C) X writes a put to Y, having an exercise price
of $29 (Giving Y the right to sell at $29). The
asset price is unlikely to rise beyond $28.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F456d272d-d953-4011-a7e3-c1b8fed84b6c%2F9c893d33-6089-46a3-9773-80e5a083405b%2Fem3cjth_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. X transfers a publicly traded marketable
equity security to Y with a date-of transfer
price equal to $25. For each of the following
transfer provisions [considered
independently],
identify the affected
condition (#1, 2 or 3) for sale accounting and
whether the provision prevents sale
accounting for the transfer.
A) A legal letter included a "would" opinion
stating that the security would be beyond the
reach of the powers of a bankruptcy trustee
of X. Thus, the transferred asset is isolated
from X.
B) Y may sell the security to a third party. In
the event when X exercise a call option to
buy back the security, Y may purchase the
same security from the open market as a
replacement.
C) X writes a put to Y, having an exercise price
of $29 (Giving Y the right to sell at $29). The
asset price is unlikely to rise beyond $28.
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