Question
In: Finance
A call option written on CBA has a strike price of $78 and trades at $3.42....
A call option written on CBA has a strike price of $78 and trades at $3.42. CBA share price is $81. The split up of option value into intrinsic value and time value is:
|
$3.00 intrinsic value and $0.42 time value |
||
|
-$2.00 intrinsic value and $5.42 time value |
||
|
$2.00 intrinsic value and $1.42 time value |
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zero intrinsic value and $3.42 time value |
Solutions
Expert Solution
Intrinsic value of the call option will be
= (Underlying price-strike price)
= (81-78)= 3
Time value of call option=(total premium -intrinsic value)= (3.42-3)= .42
Hence the correct answer will be option (A) $3 intrinsic value and $.42 time value
jeff jeffy answered 2 years agoRelated Solutions
A call option written on CBA has a strike price of $78 and trades at $3.42....
A call option written on CBA has a strike price of $78 and
trades at $3.42. CBA share price is $81. The split up of option
value into intrinsic value and time value is:
a)$3.00 intrinsic value and $0.42 time value
b)-$2.00 intrinsic value and $5.42 time value
c)$2.00 intrinsic value and $1.42 time value
d)zero intrinsic value and $3.42 time value
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