Which of the following best defines intrinsic value?
A) The lower bound of an option's value, or what the option would be worth if it were about to expire.
B) A contract that gives its owner the right to buy or sell some asset at a fixed price on or before a given date.
C) The value of a convertible bond if it could not be converted into common stock.
D) The right to sell an asset at a fixed price during a particular period of time. The opposite of a call option.
E) An option with payoffs in real goods.

Question

Quizplus · Accepted Answer

Intrinsic value refers to the actual, inherent value of an option, which is the difference between the option's strike price and the underlying asset's current price, assuming the option is in-the-money. This is what the option would be worth if it were to expire immediately.

Which of the Following Best Defines Intrinsic Value