Asked by Bryan Swartz on May 06, 2024
Verified
An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $50. The call premium is $14. What is the intrinsic value of the call?
A) $12
B) $10
C) $6
D) $23
Intrinsic Value
The actual, inherent value of a financial asset, determined through fundamental analysis without reference to its market value.
Strike Price
The pre-determined price at which the holder of an option can buy (call option) or sell (put option) the underlying asset.
Call Premium
The amount by which the call price of a bond or other security exceeds its face value, often applicable when the security is called before maturity.
- Identify and work out the inherent and temporal aspects of options.
Verified Answer
Learning Objectives
- Identify and work out the inherent and temporal aspects of options.
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