Posted: January 10th, 2022
Aurizon Holdings Limited shares currently trade at $5.21. An investor enters into a long-call option on Aurizon with an exercise price of $5.80 per share in four months, and a premium of $0.28 per share.
(a) Calculate the break-even price for the short-call position.
(b) Draw a fully labelled diagram of the long-call and short-call positions.
(c) At what minimum stock price will the option buyer exercise the option on the expiration date? (LO 20.2)
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