Which of the Following Best Describes the Intrinsic Value of an Option

question 3

Multiple Choice

Which of the following best describes the intrinsic value of an option?

• A) The value it would have if the owner had to exercise it immediately or not at all
• B) The Black-Scholes-Merton price of the option
• C) The lower bound for the option's price
• D) The amount paid for the option

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Definitions:

Troposphere

The troposphere is the lowest layer of Earth's atmosphere, where most weather phenomena occur, extending from the Earth's surface to about 8 to 15 kilometers above.

Stratosphere

The stratosphere is a layer of the Earth's atmosphere located above the troposphere, characterized by a slight temperature increase with altitude and the presence of the ozone layer.

Ozone

A molecule composed of three oxygen atoms, found in the Earth's stratosphere, where it plays a critical role in protecting living organisms from ultraviolet radiation.

Lichen

A symbiotic organism composed of a fungus and a photosynthetic partner, typically an alga or cyanobacterium, found on rocks, trees, and soil.