Bubba is long spot Canadian dollars at 0.7400. If he wants to buy one put option on Canadian dollars with a strike price of 74 and a cost of $0.35, what is Bubba's breakeven price for Canadian dollars?
A)0.4900
B)0.7365
C)0.7400
D).07435

Question

Quizplus · Accepted Answer

0.7435. The put protects against a decline in the exchange rate for Canadian dollars. However, the cost of the put raises the breakeven point to 0.7435 (0.7400 + 0.0035).

Bubba Is Long Spot Canadian Dollars at 0