Question

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $72. Calls Puts Option and NY Close Expiration Strike Price Vol. Last Vol. Last RWJ 172 139 4.50 925 Mar Apr Jul Oct 652424.40 65 182 10.25 65 151 1 1.10 65 72 12.00 55 1265 11.65 a-1. Are the call options in the money? Out a-2. What is the intrinsic value of an RWJ Corp. call option? (Do not round intermediate calculations and round your answer to the nearest whole number, 0.9. 32.) Intrinsic value b-1.Are the put options in the money? O Out b-2. What is the intrinsic value of an RWJ Corp. put option contract? (Do not round intermediate calculations and round your answer to the nearest whole number, 0.9., 32.) Intrinsic value c. Two of the options are clearly mispriced. Which ones? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Answer 1

a-1 )All the call option is "In the Money" as the stock is currently selling in at $72 and the Strike price of option is $65( Less than Current selling Price.

a-2)Intrinsic Value of In the money Call option is Price of Underlying Asset- Strike Price

=$72-$65=$7

b-1) All the put option is"Out of the Money" as the stock is currently selling Above the strike Price.

b-2) Intrinsic Value of Out of the money put option is =0 (as it will not be exercised)