The intrinsic value of an option A. is the amount the option is expected to be...
The intrinsic value of an option A. is the amount the option is expected to be worth on its expiration date. B. is the amount the option actually is worth if it is immediately exercised. C. is equal to the option premium. D. is impossible to determine in the absence of information on the future prices of the underlying asset.
Homework Answers
Total option value = Intrinsic value + Extrinsic value
= Current value + Time & Volatility value
If option executed right now, time value will disappear. Thus intrinsic value will be same as total value of option.
Hence option “B. is the amount of the option actually is worth if it is immediately exercised” is correct answer.
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