SIE practice questionmediumOptions
If a customer buys 1 ABC May 50 call at $3 when ABC is at $54, what is the intrinsic value?
- A$4✓ Correct answer
- B$3
- C$7
- D$0
Explanation
Why A — $4
Intrinsic value is the amount the option is in the money: $54 - $50 = $4. The premium ($3) is not intrinsic value. $7 is the sum, $0 applies if out of the money.
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