The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50 percent (December) and 7.62 percent (January). The times to expiration were 0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no dividends unless indicated.
-What is the intrinsic value of the December 115 put?
A)1.75
B)0.00
C)3.90
D)3.00
E)none of the above

Question

The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50 percent (December) and 7.62 percent (January). The times to expiration were 0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no dividends unless indicated.
-What is the intrinsic value of the December 115 put?
A)1.75 
B)0.00 
C)3.90 
D)3.00 
E)none of the above

Quizplus · Accepted Answer

The intrinsic value of a put option is the difference between the strike price and the current stock price, if the difference is positive. In this case, the strike price is 115 and the current stock price is 113.25, so the intrinsic value is 115 - 113.25 = 1.75.

The Following Quotes Were Observed for Options on a Given