• Donald Inc. has a December 31 fiscal year end and provides quarterly financial reports to its investors.
• On January 1, 20x1, Donald buys 1 share of Angelo Inc. for a price of $10,000 per share. This investment is categorized as available for sale.
• To mitigate the risk of a drop in price for this investment, Donald buys a put option contract on March 31, 20x1. This put option expires on Dec. 31, 20x1 and has a strike price of $11,500. The fair value hedge is effective in the quarters in which it appears to be effective.
• On November 22, 20x1, Donald receives a $750 dividend from Angelo.

Date	Price per Share	Time Value of Put Option
Jan. 1, 20x1	10,000
March 31, 20x1	11,500	125
June 30, 20x1	11,700	110
Sept. 30, 20x1	10,600	90
Dec. 31, 20x1	11,650	???

Q1/3 What is the total net effect of this investment and the put option on Net Income in Quarter 3? (July 1 to Sept. 30) (ignore the amortization of the option time value)

Answer rating: 100% (QA)

The answer is 0 Since Share price a... View the full answer