1. Why is the holder of an option not required to post margin under the Option Clearing Corporation rules?
A. The credit worthiness of the holder covers all potential losses.
B. The holder must post securities instead of margin.
C. The seller pays all costs.
D. Once an option is purchased, no further money is at risk.
2. Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Lithium, Inc.'s required rate of return for these projects is 10%. The profitability index for Project A is: a) 1.27, b) 1.17, c) 1.12, d) 1.22?