Series 7 practice questionmediumOptions Calculations 1
An investor buys 1 XYZ 40 call at 2. What is the breakeven point at expiration?
- A$38
- B$42✓ Correct answer
- C$44
- D$2
Explanation
Why B — $42
A long call breaks even at the strike price plus the premium paid: 40 + 2 = 42. Below that price at expiration, the premium is not fully recovered.
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