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Question: On January 2, 2012, Jones Company purchases a calloption for P300 on Merchant ordinary shares. The calloption gives Jones the option to buy 1,000 shares ofMerchant at a strike price of P50 per share. Themarket price of a Merchant share is P50 on January 2,2012 (the intrinsic value is therefore P0). On March31, 2012, the market price for Merchant share is P53per share, and the time value of the option is P200.What was the effect on profit of entering into thederivative transaction for the period January 2 toMarch 31, 2012?

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