The share of WMZ Ltd. is at market price of ₹ 120. Put option with a strike price of ₹ 130 is priced at ₹ 15: (i) What is the intrinsic value of option (ii) What is the time value of option.
CS Professional · Financial, Treasury and Forex Management · PYQS · December 2017
The share of WMZ Ltd. is at market price of ₹ 120. Put option with a strike price of ₹ 130 is priced at ₹ 15: (i) What is the intrinsic value of option (ii) What is the time value of option.
Answer & Explanation:
Intrinsic value of option = Strike price - Stock price = ₹ 130 - ₹ 120 = ₹ 10 Time value of option = Premium - Intrinsic value = ₹ 15 - ₹ 10 = ₹ 5
Topics: Derivatives
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