7 1000 points An investor buys a call at a price of 510 with

7· 10.00 points An investor buys a call at a price of $5.10 with an e decimal places.) xeroise price of $46. At what stock price will the investor break even on the purchase of the call? (Round your answer to 2 Break even price References eBook& Resources Worksheet Learning Objective: 15-01 Calculate the profit to various option positions as a function of ultimate securily prices Check my work

Solution

BREAK EVEN PRICE = $51.10

- Break Even is the situation where there is no profit or loss in the call option

- In this call option, if the Spot price is less than exercise price, the Loss will be $5.10

- If the stock price is greater than the exercise price, then the profit will be

Profit = [Spot price – Exercise price] – premium on call option

$0 = [Stock price - $46] - $5.10

$5.10 = Stock price - $46

Therefore, Stock price = $46 + $5.10 = $51.10

\"Hence, The Break Even Price = $51.10\"