The current price of a stock is $75. A put option with a strike price of...

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The current price of a stock is $75. A put option with a strike price of $70 is purchased along with the stock. If the breake

Answer 1

Answer #1

Ans : Option B $ 7

Breakeven point at $ 82 , it means profit from selling the stock and premium paid for put option in aggregate will be equal to zero.

Profit from stock + Premium paid for put option = 0

$ 82 - $ 75 + Premium paid for put option = 0

$ 7 + Premium paid for put option = 0

Premium paid for put option = 0 - $ 7

value of put option at the time of purchase = premium paid = $ 7

Answer 2

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