Answer :
Final answer:
The intrinsic value of the put option on the British pound with a strike price of £160 when the pound is at £157 is C) £3.
Explanation:
The intrinsic value of an option is the value that any given option would have if it were exercised today. Specifically, for a put option, the intrinsic value is calculated as the strike price minus the current price of the underlying asset, but it cannot be less than zero since an option cannot have a negative intrinsic value.
In this scenario, the investor has bought a British pound put option with a strike price of £160 when the current price of the British pound is £157. Therefore, the intrinsic value would be the difference between the strike price (£160) and the current exchange rate (£157), which is £3. So, the correct answer from the multiple choice options provided is C) £3.
