If the share price is $21.50 and the exercise price and premium of a call option...

If the share price is $21.50 and the exercise price and premium of a call option written on that share are $19.90 and $2.00, respectively, what is the time value of the option?

Select one:

$2.00

$0.40

$0.00

$17.90

$1.60

Expert Solution

Solution

As an equation, time value might be expressed as: Option Premium - Intrinsic Value = Time Value

= 2 - (21.5 - 19.9)

= 2 - 1.6

= $0.4

jeff jeffy answered 2 years ago

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