Chapter 03 · Section 3.1

Calls and puts-Intrinsic Value

                    CALL                          PUT         
 Exercise    Mar      Jun      Sep           Mar      Jun     Sep 
 Price                                                               
 30         10.15    10.85     11.65         0.05     0.35    0.85 
 35          5.40     6.90      8.10         0.25     1.35    2.15 
 40          1.90     4.00      5.35         1.75     3.40    4.35 
 45          0.40     2.10      3.45         5.30     6.50    7.40 
 50          0.05     1.05      2.15        10.05    10.50   11.15 

                Stock price: $40    Today's date: February         

• a) $3.45
  No. 73.45 is the premium. The premium = the intrinsic value + the time value. Since the time value is only equal to zero at maturity, in this example the premium cannot be equal to the intrinsic value.
  b) -$5.00
  c) $3.00
  d) $5.00
  e) $.00

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