You Purchase One JNJ 75 Call Option for a Premium

question 96

Multiple Choice

You purchase one JNJ 75 call option for a premium of $3. Ignoring transaction costs, the break-even price of the position is

• A) $75.
• B) $72.
• C) $3.
• D) $78.

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Definitions:

Capital Allocation Line

A line on a graph that shows the risk-reward ratio of portfolios that combine a risk-free asset and a risky portfolio.

Optimal Risky Portfolio

An investment portfolio that offers the highest expected return for a specific level of risk.

Risk-free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government securities.

Lend

To provide money or resources to another party with the expectation of future repayment.