A Call Option on UK Pounds Has a Strike Price

question 25

Multiple Choice

A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option?

• A) $2.03/£
• B) $2.07/£
• C) $2.05/£
• D) The answer depends upon if this is a long or a short call option.

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Definitions:

Myelinated

Refers to nerve fibers that are covered in a protective, fatty sheath called myelin, which facilitates faster electrical impulse transmission.

Morphine

A powerful opiate analgesic drug derived from the opium poppy used to relieve severe pain.

Opiates

A group of drugs derived from the opium poppy, used medicinally for pain relief but having a high potential for dependence and abuse.

Endorphins

Natural painkillers produced by the body, often associated with feelings of euphoria.