What is the options intrinsic value

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Reference no: EM131237104

Use DerivaGem to calculate the value of an American put option on a non-dividendpaying stock when the stock price is $30, the strike price is $32, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is 1.5 years. (Choose ‘‘Binomial American'' for the ‘‘option type'' and 50 time steps.)

(a) What is the option's intrinsic value?

(b) What is the option's time value?

(d) Using a trial and error approach, calculate how low the stock price would have to be for the time value of the option to be zero.

Reference no: EM131237104

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