26) An investor buys a call at a price of $5.50 with an exercise price of $50. A
ID: 2721414 • Letter: 2
Question
26) An investor buys a call at a price of $5.50 with an exercise price of $50. At what stock price will the investor break even on the purchase of the call? (Round your answer to 2 decimal places.)
25) The May 17, 2012, price quotation for a Boeing call option with a strike price of $50 due to expire in November is $20.80, while the stock price of Boeing is $69.80. The premium on one Boeing November 50 call contract is _________. a. $4,900 b. $1,980 c. $2,080 d. $5,000
With transaction costs ignored, how much would a buyer have to pay for one call option contract. Assume each contract is for 100 shares.
9) You establish a straddle on Walmart using September call and put options with a strike price of $63. The call premium is $4.90 and the put premium is $5.65.
What is the most you can lose on this position? (Input the amount as positive value. Round your answer to 2 decimal places.)
What will be your profit or loss if Walmart is selling for $70 in September? (Input the amount as positive value. Round your answer to 2 decimal places.)
At what stock prices will you break even on the straddle? (Input your answers from highest to lowest to receive credit for your answers. Round your answers to 2 decimal places.)
Break even price $Explanation / Answer
Answer for question 26
Call price = $5.50
Exercise price = $55
Break even stock price of call option is calculated below using following formula:
Break-even price = Strike price + Option premium cost + Commission and transaction costs
= $50 + $5.50 + $0
= $55.50
Hence, Break even stock price of call option is $55.50
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