35. Given a current share price of $20 and an exercise price of $22, which of th

Question

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.

Explanation / Answer

Intrinsic value is the difference between the stock price and the exercise price in case of call options.call options are exercised when the stock price rises.

put options is the difference between the exercise price and the stock price . Put options are exercised when the stock price falls.

So, the correct option is C.

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