British Imports has a stock price of $38.62 a share.The $35 put is priced at $.15.The intrinsic value of the put is ________,and the time value is ________.

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is the strike price minus the stock price, as long as this is a positive value. In this case, since the strike price is $35 and the stock price is $38.62, the intrinsic value is $0. Anything above $35 would be considered "out of the money" and have no intrinsic value.

The time value is the difference between the option price and the intrinsic value. In this case, the option price is $.15 and the intrinsic value is $0, so the time value is $.15. Therefore, the best choice is C.

British Imports Has a Stock Price of $38