Finra Exam Series-7 Topic 6 Question 100 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 100
Topic #: 6

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?

A0.4900

B0.7365

C0.7400

D0.7435

Show Suggested Answer

Suggested Answer: D

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).

by Nickie at Sep 18, 2024, 08:53 PM

Limited Time Offer

25%

Off

Get Premium Series-7 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Roxane

4 months ago

Wait, Bubba? Who names their kid Bubba these days? Must be a real 'murican if he's trading Canadian dollars.

upvoted 0 times

Brandee

4 months ago

C: Interesting choice to trade Canadian dollars for Bubba.

upvoted 0 times

...

Sharita

4 months ago

B: That's correct. He needs the spot rate to rise above that to profit.

upvoted 0 times

...

Frank

4 months ago

A: Bubba's breakeven price is 0.7435.

upvoted 0 times

...

Ryan

5 months ago

You guys are overthinking this. The answer is clearly A. 0.4900. Bubba's a real pro, he knows what he's doing.

upvoted 0 times

Vashti

4 months ago

I'm with you, A) 0.4900 seems right. Bubba knows his stuff.

upvoted 0 times

...

Mitsue

4 months ago

No way, it's definitely A) 0.4900. Bubba's got this.

upvoted 0 times

...

Ruth

4 months ago

Are you sure about that? I think it's C) 0.7400.

upvoted 0 times

...

Phillip

4 months ago

A) 0.4900

upvoted 0 times

...

Merlyn

5 months ago

I'm not sure, but I think the breakeven price is calculated by subtracting the cost of the put option from the strike price. So, the answer might be D) 0.7435.

upvoted 0 times

...