The Premium on a Pound Put Option Is

question 69

Multiple Choice

The premium on a pound put option is $.03 per unit. The exercise price is $1.60. The break-even point is ____ for the buyer of the put, and ____ for the seller of the put. (Assume zero transactions costs and that the buyer and seller of the put option are speculators.)

• A) $1.63; $1.63
• B) $1.63; $1.60
• C) $1.63; $1.57
• D) $1.57; $1.63
• E) None of these are correct.

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Definitions:

Manufacturing Overhead Costs

Indirect costs related to manufacturing that do not directly tie to a specific product, such as factory utilities or salary of the production manager.

Product Costs

Costs directly associated with the creation of a product, including direct materials, direct labor, and overhead.

Total Variable Cost

The sum of all costs that vary with the level of production or sales, such as materials and direct labor.

Direct Costs

Expenses that can be directly traced to a specific cost object, such as a product, department, or project.