Lew Paid $300 to Purchase a Call on XYZ with a Strike

question 53

Multiple Choice

Lew paid $300 to purchase a call on XYZ with a strike price of $25. What does the market price of XYZ have to be for Lew to break- even on his option investment? Ignore transaction costs and taxes.

• A) $22.
• B) $28.
• C) $25.
• D) Cannot be determined from the information provided.

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Definitions:

Contract

A legally enforceable agreement between two or more parties, typically involving the exchange of goods, services, money, or promises.

Court

A governmental body authorized to adjudicate legal disputes, interpret laws, and administer justice.

Basis

The underlying support or foundation for an idea, argument, or process.

Sue

To initiate legal proceedings against an individual or entity in order to seek redress or enforce a right.