A Strategy Consists of Longing a Put on the Market

question 15

Multiple Choice

A strategy consists of longing a put on the market index with a strike of 830 and shorting a call option on the market index with a strike price of 830.The put premium is $18.00 and the call premium is $44.00.Interest rates are 0.5% per month.What is the breakeven price of the market index for this strategy at expiration (in 6 months) ?

• A) $802.12
• B) $830.00
• C) $855.21
• D) $866.32

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Definitions:

Unit Product Cost

The total cost associated with producing one unit of product, including direct materials, direct labor, and allocated overhead.

Investment

An asset or item acquired with the intention of generating income or appreciating in value over time.

Markup

The amount added to the cost of a product to determine its selling price, reflecting profit and overhead costs.

Net Operating Income

A company's income after operating expenses have been subtracted but before deducting interest and taxes.