A stock is selling for $31. There is a call option on the stock with an exercise price of $27. What is the approximate minimum value of the call option?
A) $0
B) $4
C) $27
D) $31

Question

Quizplus · Accepted Answer

The minimum value of a call option is the current stock price minus the exercise price, if this value is positive; otherwise, it's zero. Here, it's $31 - $27 = $4. This is known as the option's intrinsic value.

A Stock Is Selling for $31