For Stock ABC the December next yearForward is $450. A call option on ABC, has aStrike of $420 and costs (premium) $50.What is the intrinsic and extrinsic value? A.Intrinsic $30, Extrinsic $30 B.Intrinsic $40, Extrinsic $10 C.Intrinsic $0, Extrinsic $30 D.Intrinsic $30, Extrinsic $20

A forward contract allows you to buy or sell an asset at a predetermined price in the future. An…

Answered: For Stock ABC the December next year…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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For Stock ABC the December next year

Forward is $450. A call option on ABC, has a

Strike of $420 and costs (premium) $50.

What is the intrinsic and extrinsic value?

A.

Intrinsic $30, Extrinsic $30

B.

Intrinsic $40, Extrinsic $10

C.

Intrinsic $0, Extrinsic $30

D.

Intrinsic $30, Extrinsic $20

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