"The premium on a pound put option is $.04 per unit. The exercise price is $1.60. The break-even point is ____ for the buyer of

Question

3 years ago

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"The premium on a pound put option is $.04 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 transaction costs and that the buyer and seller of the put option are speculators." g

Business

1 answer:

IrinaVladis [17] · Answer 1 · 2022-07-21T12:25:34+03:00

Answer:

$1.56, $1.56

Explanation:

Break-even point on a Put option is the Net of premium cost. Your exercise price is $1.60, it includes the premium price paid to the seller. The break-even point for the will be $1.56 ( $1.60 - $0.04 ) and for the seller it will also be $1.56 because there is no transaction cost is involved and the premium received is an income for him.