Given a Current Share Price of $20 and an Exercise

question 34

Multiple Choice

Given a current share price of $20 and an exercise price of $22, which of the following statements is true?

• A)A call option has an intrinsic value of $2 and a put option has an intrinsic value of $0.
• B)A call option has an intrinsic value of -$2 and a put option has an intrinsic value of $2.
• C)A call option has an intrinsic value of $0 and a put option has an intrinsic value of $2.
• D)A call option has an intrinsic value of $0 and a put option has an intrinsic value of -$2.
• E)A call option has an intrinsic value of $2 and a put option has an intrinsic value of $2.

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Definitions:

Privity Rule

A doctrine stating that only parties to a contract can sue or be sued on the contract's terms, restricting the rights of external parties.

Novation

A legal process by which an existing contract is replaced by a new contract, with the consent of all parties involved, often involving a change of parties or terms.

Statutory Assignment

The transfer of rights or interests in a particular matter as established by statute or legislative action.

Equitable Assignment

A method by which contractual rights are transferred from one party to another, in a manner recognized by equity or fairness, rather than strictly by the letter of the law.