A 6-month put option on Smith Corp.'s stock has a strike price of $45 and sells in the market for $8.90.Smith's current stock price is $41.What is the option premium?
A)$4.41
B)$4.90
C)$5.39
D)$5.93
E)$6.52

Question

Quizplus · Accepted Answer

The option premium is calculated as the market price of the option minus the intrinsic value. The intrinsic value of the put option is the strike price ($45) minus the current stock price ($41), which is $4. The market price of the option is $8.90. Therefore, the option premium is $8.90 - $4 = $4.90.

A 6-Month Put Option on Smith Corp