Explanation:
The call option is in-the-money as the underlying price is greater than the exercise price ($1.35 vs. $1.32, respectively).
Break-even price = X + C₀ = $1.32 + $0.08 = $1.40
Q.3561 Jason Briggs purchased a 3-month call option by paying $0.08. The exercise price of the option is $1.32 while the underlying is priced at $1.35. Is the option currently in-the-money and at what price will break-even occur?
A
In-the-money: No; Break-even price: $1.27
B
In-the-money: Yes; Break-even price: $1.40
C
In-the-money: Yes; Break-even price: $1.35
D
In-the-money: No; Break-even price: $1.40
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