Rosalita purchased a put option with a strike price of $47. She paid a total of $150 for the contract. What is the break-even stock price?
A)$31.40
B)$33.60
C)$36.40
D)$45.50
E)$48.50

Question

Quizplus · Accepted Answer

To break even, Rosalita needs the stock price to be below the strike price minus the premium paid for the option.

Break-even stock price = Strike price - Premium 
Break-even stock price = $47 - $150/100 (convert premium from cents to dollars) 
Break-even stock price = $47 - $1.50 
Break-even stock price = $45.50

Therefore, the correct answer is D, $45.50.

Rosalita Purchased a Put Option with a Strike Price of $47