The intrinsic value of an in-of-the-money call option is equal to
A)the call premium.
B)zero.
C)the stock price minus the exercise price.
D)the striking price.

Question

Quizplus · Accepted Answer

The intrinsic value of an in-of-the-money call option is equal to the stock price minus the exercise price. This is because, as the option is in-the-money, the holder of the option can exercise the option and buy the underlying stock at the exercise price, which is lower than the current stock price. Therefore, the intrinsic value is the difference between the current stock price and the exercise price.

The Intrinsic Value of an In-Of-The-Money Call Option Is Equal