- 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

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**CFA Practice Question**

Suppose a stock exists with a price of $42, and a call option on the stock exists with an exercise price of $36. What is the approximate minimum value of the call option?

B. $0

C. $6

A. $36

B. $0

C. $6

Correct Answer: C

42 - 36 = 6

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**User Contributed Comments**
4

User |
Comment |
---|---|

aakash1108 |
....actually a little bit more than $6.00 if it is before the expiration day.....X will be discounted at RFR, and thus S-X will be a li'l bit higher than $6.00 |

endeca |
minimum value is $6. That's what the question asks. |

jonan203 |
this question is asking about intrinsic value, aakash in refering to extrinsic value (time value) which is NOT a part of this question... |

khalifa92 |
cT=Max(0,ST-X) thus max = 6, Minimum = 0 |