Inca Company purchases a call option to hedge an investment of 20,000 shares of Limbaugh Company stock. The option agreement provides that if the prices of a share of Limbaugh Company stock is greater than $30 on October 25, Inca receives the difference (multiplied by 20,000 shares). Alternatively, if the price of the stock is less than $30, the option is worthless and will be allowed to expire
Which of the following statements regarding this call option is correct?
a. The call option effectively hedges the investment in the shares of Limbaugh stock.
b. The call option is an option to sell Limbaugh Company stock at a fixed price.
c. The call option represents a speculative option rather than a hedge.
d. Inca could have purchased a put option or a call option to effectively hedge the investment in the shares of Limbaugh stock.
C
You might also like to view...
Liability is imposed on an agent who has exceeded his authority on the basis of a(n):
A. definitive warranty of authority. B. implied warranty of authority. C. actual warranty of authority. D. direct warranty of authority.
McVeigh Corp. owns 40% of Gondor Company's common stock. McVeigh received $41,200 in cash dividends from Gondor. The entry to record the cash dividend received from Gondor would include a:
A. Credit to Cash for $41,200. B. Debit to Dividends for $103,000. C. Credit to Equity Method Investments for $103,000. D. Debit to Dividend Revenue for $41,200. E. Credit to Equity Method Investments for $41,200.
What is a post-implementation review? Identify five benefits of a post-implementation review
What will be an ideal response?
Which of the following is true with regard to how a new product is defined?
A. A product should be considered "new" if it is new in any way for the company concerned. B. The FTC would not call an existing product new, even if it were changed in a functionally significant way. C. A new product must be totally different before it can be called a "new product." D. There is no legal limit on how long a product can be called "new." E. All these answers are correct.