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You think that stock S will increase and purchase a nine-month call spread on the stock. The current price of one share is 58.50. The
You think that stock S will increase and purchase a nine-month call spread on the stock. The current price of one share is 58.50. The lower strike price is 60 and the higher strike price is 65. The premium for the call option with a 60-strike price is 4.35. The premium for the call option with a 65-strike price is 1.60. The continuously compounded risk- free interest rate is 6%. Calculate the break-even stock price, that is, when the profit is null. A. 65.88 B. 64.88 C. 63.88 D. 62.88 O E. 61.88
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