Which of the following 3-month American-style call options should have the largest "intrinsic value"?

a) A substantially out-of-the-money call

b) An at-the-money call

c) A substantially in-the-money call

d) Can't say

Solutions

Expert Solution

option a is entirely made up of extrinsic value.

option b has zero intrinsic value.

option c primarily made up of intrinsic value with a very little extrinsic value.

Therefore, Option C is the right option !

jeff jeffy answered 2 years ago

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