An American-style call option with six months to maturity has a strike price of $35.The underlying stock now sells for $43.The call premium is $12.What is the intrinsic value of the call?
A) $12
B) $8
C) $0
D) $23
E) none of these.

Question

Quizplus · Accepted Answer

The intrinsic value of the call option is the difference between the current stock price and the strike price, which is $43 - $35 = $8. Therefore, the intrinsic value of the call option is $8. The call premium of $12 is higher than the intrinsic value, so the option has some time value as well.

An American-Style Call Option with Six Months to Maturity Has