SIE practice questionmediumCall options
If ABC is trading at $56 and the ABC 55 call is trading at $2.50, what is the intrinsic value?
- A$2.50
- B$1.00✓ Correct answer
- C$0.50
- D$6.00
Explanation
Why B — $1.00
Intrinsic value = market price - strike = $56 - $55 = $1. The rest is time value. $2.50 is the premium, not the intrinsic value.
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