Suppose that Maxima shares are selling for $10 per share and you own a call option to buy Maxima shares at $7.50.The intrinsic value of your option is:

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the current market price of the underlying asset and the strike price of the option. In this case, the current market price of Maxima shares is $10 and the strike price of the option is $7.50, so the intrinsic value of the option is $10 - $7.50 = $2.50.

Suppose That Maxima Shares Are Selling for $10 Per Share