Question
A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the stock with a strike
A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price below which the trader makes a profit is
a. $20
b. $26
c. $28
d. $25
Despite the fact that forward contracts carry more credit risk than futures contracts, forward contracts offer what primary advantage over futures contracts?
a. Terms and conditions are tailored to the specific needs of the two parties involved
b. Transaction information between the two parties involved in the forward contract is readily available to the public
c. Forward contracts prevent the writer from assuming the credit risk of the buyer
d. The over-the-counter forward market is a highly regulated market
A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price below which the trader makes a profit is
$20
$26
$28
$25
Despite the fact that forward contracts carry more credit risk than futures contracts, forward contracts offer what primary advantage over futures contracts?
Terms and conditions are tailored to the specific needs of the two parties involved
Transaction information between the two parties involved in the forward contract is readily available to the public
Forward contracts prevent the writer from assuming the credit risk of the buyer
The over-the-counter forward market is a highly regulated market
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