15. A 45 put option on a stock priced at $42.70 is priced at $6.20. This...

Question

Question

15. A 45 put option on a stock priced at $42.70 is priced at $6.20. This put has an intrinsic (2 points) Show your work. and

Answer 1

Answer #1

Put option price = Intrinsic value + Time value

If St < X, Intrinsic value = X - St = 45 - 42.70 = $2.3

[ if St >= X, Intrinsic value = 0 ]

6.2 = 2.3 + Time value

Time value = 6.2 - 2.3 = $3.9

Intrinsic value = $2.3

Time value = $3.9

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Answer 2

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