34. Calculate the intrinsic value and time value of a put option for which the s
ID: 2812025 • Letter: 3
Question
34. Calculate the intrinsic value and time value of a put option for which the share price is $19, the strike price is $17.50 and the option price is $0.20.
A.
$0, $0.20
B.
$0, $1.30
C.
$0.20, $0
D.
$1.50, $1.30
E.
$1.30, $1.50
35. Given a current share price of $20 and an exercise price of $22, which of the following statements is true?
A.
A call option has an intrinsic value of $2 and a put option has an intrinsic value of $0.
B.
A call option has an intrinsic value of -$2 and a put option has an intrinsic value of $2.
C.
A call option has an intrinsic value of $0 and a put option has an intrinsic value of $2.
D.
A call option has an intrinsic value of $0 and a put option has an intrinsic value of -$2.
E.
A call option has an intrinsic value of $2 and a put option has an intrinsic value of $2.
A.
$0, $0.20
B.
$0, $1.30
C.
$0.20, $0
D.
$1.50, $1.30
E.
$1.30, $1.50
Explanation / Answer
34)
strike price , k = 17.50
share price , p = 19
option price . c = 0.20
intrinsic value = k - p
since k is < p , intrinsic value will be = 0
time value = c - intrinsic value = 0.20 - 0 = $0.20
hence correct option is A) 0 , $0.20
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