Series 7 practice questionmediumOptions — Call Buyer Breakeven Scenario
An investor buys 1 RST Mar 80 call at $6.50. At which stock price will the investor break even at expiration?
- A$73.50
- B$80.00
- C$86.50✓ Correct answer
- D$93.50
Explanation
Why C — $86.50
Breakeven for a long call = strike price + premium paid = $80 + $6.50 = $86.50. At this price, the call's intrinsic value ($86.50 - $80 = $6.50) exactly equals the premium paid, resulting in neither a profit nor a loss. Above $86.50, the investor profits.
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