USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.

-Refer to Exhibit 14.5. The intrinsic value for the put option with a $50 exercise price is
A) $0.00.
B) $1.50.
C) $2.25.
D) $3.75.
E) $8.75.

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.
 
-Refer to Exhibit 14.5. The intrinsic value for the put option with a $50 exercise price is
A) $0.00. 
B) $1.50. 
C) $2.25. 
D) $3.75. 
E) $8.75.

Quizplus · Accepted Answer

The intrinsic value of a put option is the difference between the exercise price and the current stock price, only if the exercise price is higher than the current stock price. In this case, the exercise price is $50 and the current stock price is also $50, so the intrinsic value is $0.00.