The strike price on a call option is $8 and the price of the underlying stock is $10.What is the time value of money of the call option if the option premium is $3?
A)$4
B)$3
C)−$2
D)$1

Question

Quizplus · Accepted Answer

The time value of an option is calculated by subtracting the intrinsic value from the option's premium. The intrinsic value of a call option is the current stock price ($10) minus the strike price ($8), which equals $2. The option premium is $3. Therefore, the time value is $3 - $2 = $1.

The Strike Price on a Call Option Is $8 and the Price