Jamie Wrote a Nine-Month Put on Beta Stock

question 63

Multiple Choice

Jamie wrote a nine-month put on Beta stock. The strike price was $25 and the market price of Beta stock at the time the option was written was $24. The total price of the option contract was $150. At what market price will Jamie just break-even on this investment? Ignore transaction costs and taxes.

• A) $23.50
• B) $24.00
• C) $25.00
• D) $26.50

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Definitions:

Cognitive Dissonance

A state of tension that occurs when a person simultaneously holds two cognitions that are psychologically inconsistent or when a person’s belief is incongruent with his or her behavior.

Draftee

An individual who has been selected or conscripted for military service, often through a formal process.

Smoker

An individual who engages in the act of inhaling and exhaling the smoke of tobacco or a similar substance.

Cognitive Schema

An integrated mental network of knowledge, beliefs, and expectations concerning a particular topic or aspect of the world.