The Premium on a Pound Put Option Is

question 34

Multiple Choice

The premium on a pound put option is $.03 per unit. The exercise price is $1.60. The break-even point is ____ for the buyer of the put, and ____ for the seller of the put. (Assume zero transactions costs and that the buyer and seller of the put option are speculators.)

• A) $1.63; $1.63
• B) $1.63; $1.60
• C) $1.63; $1.57
• D) $1.57; $1.63
• E) none of the above

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Definitions:

CPI Increased

A rise in the Consumer Price Index, indicating a general increase in the prices of consumer goods and services.

4%

An interest rate or percentage representing a part of a whole, especially in the context of financial rates.

C$ Per US$

The exchange rate determining how much Canadian dollars (C$) you can exchange for one US dollar (US$).

Exchange Rate

The financial value of one currency in the context of another for the purpose of exchange.