- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 7. The Value of a European Option at Expiration
CFA Practice Question
A put option has a strike of $100, its premium is $7, and the stock is at $100. What is the intrinsic value?
A. -$7
B. $0
C. $7
User Contributed Comments 4
| User | Comment |
|---|---|
| 0is4eva | P(T) = Max(0,X-S(T)) |
| andy4cfa | pay attention: intrinsic value does NOT include the premium ($7) |
| Criticull | Thank you for this, I would have included the premium otherwise. |
| boddunah | option premium = intrinsic value + time value. exercise price and underlying price is the same so there is no intrinsic value . $7 is time value. |