A stock is selling for $45.75, with a put option available at a $50 strike that has a premium of $7.50. What is the intrinsic value of the put?
A)$4.25
B)$1.25
C)$3.25
D)$5.25
E)$7.50

Question

Quizplus · Accepted Answer

The intrinsic value of a put option is equal to the strike price minus the current stock price.

In this case, the strike price of the put option is $50 and the current stock price is $45.75.

So the intrinsic value of the put option is:

$50 - $45.75 = $4.25

Therefore, the correct answer is (A).

A Stock Is Selling for $45