The price of a non-dividend-paying stock is $74. A three-month American call option on the stock...

The price of a non-dividend-paying stock is $74. A three-month American call option on the stock with a strike price of $70 is selling for $9. What is the intrinsic value (IV) of this call option?

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Expert Solution

The call option is in-the-money because the stock price is higher than the strike price.

Intrinsic value of in-the-money call option = (stock price - strike price)

Intrinsic value = $74 - $70

Intrinsic value = $4

jeff jeffy answered 2 years ago

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