The Intrinsic Value of an Option Is

question 96

Multiple Choice

The intrinsic value of an option is:

• A) the same as the option premium.
• B) the amount the option is actually worth if it is immediately exercised.
• C) the amount the option is likely to be worth on its expiration date.
• D) impossible to determine given the lack of information on the future prices of the underlying asset.

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Definitions:

Product Costs

Expenses directly associated with creating a product, including direct materials, direct labor, and manufacturing overhead costs.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the production cost.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries of non-direct labor.

Indirect Materials

Materials used in the production process, but cannot be directly associated with a specific product.