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The Premium on a Euro Call Option Is

question 138

Multiple Choice

The premium on a euro call option is $.02. The exercise price is $1.32. The break-even point is ____ for the buyer of the call, and ____ for the seller of the call. (Assume zero transactions costs and that the buyer and seller of the put option are speculators.)


Definitions:

Long Run

A period during which all factors of production and costs are variable, and firms can enter or exit the industry.

Total Revenue

The gross revenue from selling products or services before deducting any costs.

Fixed Cost

Expenditures that do not change with the level of production or sales, such as rent, salaries, and insurance.

Total Cost

the complete cost of production including both fixed and variable costs.

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