Which of the following statements is true about the purchase of a protective put at a higher exercise price relative to a lower exercise price?
A)the breakeven is lower
B)the maximum loss is greater
C)the insurance is less costly
D)the insurance is more costly
E)none of the above

Question

Quizplus · Accepted Answer

When purchasing a protective put at a higher exercise price relative to a lower exercise price, the insurance is more costly. This is because the higher exercise price offers more protection, meaning the insurance carries a higher premium. Additionally, the breakeven point is higher, and the maximum loss is limited to the premium paid for the put option.

Which of the Following Statements Is True About the Purchase