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CFA Level 1
Derivatives

Intrinsic Value of a European Call Option

Easy Derivative Pricing And Valuation Options

A trader is considering purchasing a European call option on a stock that is currently trading at $50. The strike price of the option is $55, and the option expires in three months. The risk-free interest rate is 2% per annum, compounded continuously. Assuming no dividends are paid on the stock, what can be concluded about the intrinsic value of this call option at expiration?

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