If the price of an option is $475 and the time value of money is $375 then the intrinsic value of an option is ____________?
Correct answer: B. 100
- A. 375
- B. 100
- C. 475
- D. 850
Explanation
An option premium equals intrinsic value plus time value, so intrinsic value is $475 minus $375, or $100. The time value is the portion of the premium attributable to the remaining time before expiry.
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