On March 1, 2022, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $90 per share, with an expiration date of May 31, 2022. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below. March 1 March 31 May 5 Price of SST stock: $90 $80 $85 Time value of option: $50 $40 $30 Required: 1. What is cost of the option paid by Ferguson Corp. on March 1, 2022? 2. Compute the balance of the option account on May 5 before the settlement
On March 1, 2022, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $90 per share, with an expiration date of May 31, 2022. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below. March 1 March 31 May 5 Price of SST stock: $90 $80 $85 Time value of option: $50 $40 $30 Required: 1. What is cost of the option paid by Ferguson Corp. on March 1, 2022? 2. Compute the balance of the option account on May 5 before the settlement
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
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A-12: Put option
On March 1, 2022, Ferguson Corp. purchased a put option on shares of SST stock. The contract was for 100 shares at a strike price of $90 per share, with an expiration date of May 31, 2022. Ferguson settled the option on May 5 (assume cash settlement). Additional information pertaining to the option is provided below.
March 1 | March 31 | May 5 | |
Price of SST stock: | $90 | $80 | $85 |
Time value of option: | $50 | $40 | $30 |
Required:
1. What is cost of the option paid by Ferguson Corp. on March 1, 2022?
2. Compute the balance of the option account on May 5 before the settlement.
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