Stock ABC has a Forward for December at: $450, Is it reasonable that A PUT option on ABC, with a strike of $500, costs $45? A. No because the minimum intrinsic is $50. B. No, because $35 feels low for a stock with such a high price per share. C. Yes because Intrinsic is $40, Extrinsic is $5 D. Yes because it depends on the distribution; that is defined by the volatility and time to maturity

Stock ABC has a Forward for December at: $450, Is it reasonable that A PUT option on ABC, with a strike of $500, costs $45? A. No because the minimum intrinsic is $50. B. No, because $35 feels low for a stock with such a high price per share. C. Yes because Intrinsic is $40, Extrinsic is $5 D. Yes because it depends on the distribution; that is defined by the volatility and time to maturity

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 8E

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	A.	No because the minimum intrinsic is $50.
	B.	No, because $35 feels low for a stock with such a high price per share.
	C.	Yes because Intrinsic is $40, Extrinsic is $5
	D.	Yes because it depends on the distribution; that is defined by the volatility and time to maturity