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Bubba is long spot Canadian dollars at 0.7400. If he wants to buy one put option on Canadian dollars with a strike price of 74 and a cost of $0.35, what is Bubba's breakeven price for Canadian dollars?
Suggested Answer: D
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0.7435. The put protects against a decline in the exchange rate for Canadian dollars. However, the cost of the put raises the breakeven point to 0.7435 (0.7400 + 0.0035).
12 comments · newest first
JU
Jules
12 months ago
Just did the math, 0.7365 is spot on!
BR
Brett
1 year ago
I thought it would be higher, interesting!
LA
Lamonica
1 year ago
Wait, how does that add up?
AN
Antonette
1 year ago
Totally agree, that makes sense!
TE
Terrilyn
1 year ago
Breakeven is 0.7365 after the option cost.
SH
Shannon
1 year ago
I think the answer might be 0.7365, but I’m second-guessing myself. I need to double-check how to calculate the breakeven with the option cost included.
DU
Dusti
1 year ago
I feel like the breakeven should be around the strike price, but I'm confused about how the cost of the option factors in.
LI
Lilli
1 year ago
I remember a similar question where we had to calculate breakeven with options, and I think it was just the strike price minus the premium. So maybe it's 0.7400 - 0.35?
AL
Aleisha
1 year ago
I think the breakeven price is the strike price minus the cost of the put option, but I'm not entirely sure how to apply that here.
AL
Alexis
1 year ago
I'm a little confused on this one. I know sexual harassment is a serious issue, but I'm not sure which specific principles in the code of ethics would apply. I'll have to review the options carefully and try to reason through it.
SH
Shanice
1 year ago
The Installation Wizard seems familiar too, but that might have been a different part of the process.
DE
Denny
1 year ago
I remember we practiced something about routing international numbers, but I'm unsure if it was specifically E.164.