Asked by Bryan Swartz on May 06, 2024

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An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $50. The call premium is $14. What is the intrinsic value of the call?

A) $12
B) $10
C) $6
D) $23

Intrinsic Value

The actual, inherent value of a financial asset, determined through fundamental analysis without reference to its market value.

Strike Price

The pre-determined price at which the holder of an option can buy (call option) or sell (put option) the underlying asset.

Call Premium

The amount by which the call price of a bond or other security exceeds its face value, often applicable when the security is called before maturity.

  • Identify and work out the inherent and temporal aspects of options.
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Fabiola TorresMay 10, 2024
Final Answer :
C
Explanation :
The intrinsic value of a call option is the current price of the underlying stock minus the strike price, if this value is positive, or zero otherwise. Here, it's $50 - $44 = $6.