Homework Answers
(4) Breakeven at expiry means Profit/Loss(net) on asset and on option will be 0
Asset was purchased at $100 and at expiry it is $114. Therefore, profit on asset is $14.
Therefore, loss on option is $14.
If at expiration, asset price it $114, then the put option would be out of the money and worthless i.e. 0
Therefore, entire loss will be the premium paid to buy that option.
Therefore, Premium paid would be $14.
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