A 45 put option on a stock priced at $50 is priced at $3.50.This call has an intrinsic value of ______ and a time value of _____.
A) $3.50; $0
B) $5.00; $3.50
C) $3.50; $5.00
D) $0; $3.50

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is the amount by which the strike price exceeds the stock price. Since the stock price ($50) is above the strike price ($45), the intrinsic value is $0. The time value is the option price ($3.50) minus the intrinsic value ($0), which equals $3.50.

A 45 Put Option on a Stock Priced at $50