Question

What is the exercise value (intrinsic value) at the time of purchase (t = 0) to the holder of a put
with strike price $120 if the underlying asset is $125 and the put premium is $5?
$0
$5
$10

$15
$20

0 0
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Answer #1

Intrinsic Value of Put Option = Max((Strike Price - Spot Price), 0)

So,

Intrinsic Value = Max((120 - 125), 0)

Intrinsic Value = $0

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