The intrinsic value of a call equals the:
A)exercise price minus the stock price.
B)upper bound of the call's value.
C)market price of the call option.
D)lower bound of the call's value.
E)premium paid to purchase the call.

Question

Quizplus · Accepted Answer

The intrinsic value of a call option equals the current stock price minus the exercise price. This means that the lower bound of a call option's value is its intrinsic value, as it cannot be worth less than the difference between the current stock price and the exercise price. Choices A, B, C, and E are incorrect, as they do not reflect the intrinsic value of a call option.

The Intrinsic Value of a Call Equals The