Suppose there is a call option on a stock with one month to expiration. The intrinsic value of the call must be _________ than the actual value of the call.
A) less than or equal to
B) equal to
C) greater than or equal to
D) equal to if the stock pays a dividend
E) There is no definite relationship.

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the stock price and the strike price. Therefore, it cannot be greater than the actual value of the call option, which includes time value and other factors. It can be equal to the actual value in some cases, but it cannot be greater. This is true regardless of whether the stock pays a dividend or not.

Suppose There Is a Call Option on a Stock with One