Theo Paid a Total of $50 to Purchase 4 Call

question 104

Multiple Choice

Theo paid a total of $50 to purchase 4 call options with a strike price of $54. What is the break-even stock price?

• A)$12.50
• B)$25.00
• C)$23.63
• D)$54.13
• E)$56.32

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Definitions:

Perpetual Inventory System

A method of accounting for inventory that records real-time transactions of goods as they come in and out of stock, thus maintaining a continuously updated inventory balance.

Periodic System

A method of inventory valuation for financial statements where purchases during the period are recorded directly to an inventory account and the cost of goods sold is determined at the end of the accounting period.

Purchase Discounts

A reduction in the purchase price, allowed by the seller to encourage early payment by the buyer.