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Suppose that Maxima shares are selling for $139.3 per share and you own a call option to buy Maxima shares at $149.0. The intrinsic value of your option is:Question 6Answera.9.70b.-9.70c.0.00

Question

Suppose that Maxima shares are selling for 139.3pershareandyouownacalloptiontobuyMaximasharesat139.3 per share and you own a call option to buy Maxima shares at 149.0. The intrinsic value of your option is:Question 6Answera.9.70b.-9.70c.0.00

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Solution

The intrinsic value of an option is calculated as the difference between the current price of the underlying asset (in this case, Maxima shares) and the strike price of the option.

Intrinsic Value = Current Price - Strike Price

Here, the current price of Maxima shares is 139.3andthestrikepriceoftheoptionis139.3 and the strike price of the option is 149.0.

Intrinsic Value = 139.3139.3 - 149.0 = -$9.7

So, the intrinsic value of the option is -$9.7. This means the option is currently not in the money, as the strike price is higher than the current price of the shares. Therefore, the correct answer is b. -9.70.

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