Consider a stock that is currently trading at $45. Calculate the intrinsic value for a call option that has an exercise price of $35.
A) $25
B) $35
C) $0
D) -$10
E) $10

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is calculated as the current stock price minus the exercise price, provided this difference is positive. If the stock is trading at $45 and the exercise price is $35, the intrinsic value is $45 - $35 = $10. If the result is negative, the intrinsic value is considered to be $0, as options cannot have a negative intrinsic value.

Consider a Stock That Is Currently Trading at $45