You Purchased 6 Put Option Contracts on Mountain Builders Stock

question 98

Multiple Choice

You purchased 6 put option contracts on Mountain Builders stock at an option premium of $0.75. The strike price is $25. What is your break-even stock price?

• A) $19.90
• B) $24.25
• C) $25.00
• D) $25.75
• E) $30.10

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Definitions:

Good-faith Purchaser

An individual who buys property without knowing of any claims, liens, or encumbrances against it, thereby acquiring clean title.

Voidable

A term applied to a contract that one or both parties have the ability to either withdraw from or enforce.

Good Title

A legal term indicating that a property title is valid and free of any liens or other encumbrances that might hinder its sale or use.

Fair Market Value

The price at which property would sell on the open market between a willing buyer and a willing seller, each having reasonable knowledge of the relevant facts.