Question

De Ingler utan nat of a European call option None of the above are true, since the decision to exercise the option early lies with the writer of the option QUESTION 5 Which of the following is true about the premium of a European put option in relation to the option's intrinsic value? The premium must always be greater than - or equal to the option's intrinsic value. The premium must always be less than the option's intrinsic value. The premium must always be equal to the option's intrinsic value. The premium could be greater than - less than - or equal to the option's intrinsic value. QUESTION 6 The monthly standard deviation in the price of bacon (in cents per pound) is 1.3. The futures contract whose pri movements have the closest correlation to those of bacon is that for pork bellies. The standard deviation of por ick Save and Submit to save and submit. Click Save All Answers to save all answers.

hint（think about the conditions under which early exercise of an American put option is optimal. What would happen to a European put option in this condition）

Answer 1

QUESTION 5

Option a is correct

The premium must always be greater than or equal to the option's intrinsic value

Premium = Time value + Intrinsic value

The intrinsic value of an option can be zero, but there is always some time value left in the option.

So, premium >=Intrinsic value

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