The value of a European style call option is the sum of two components:
A) the present value plus the intrinsic value.
B) the time value plus the present value.
C) the intrinsic value plus the time value.
D) the intrinsic value plus the standard deviation.

Question

Quizplus · Accepted Answer

The value of a European style call option is the sum of two components: the intrinsic value (the difference between the underlying asset's current price and the strike price) and the time value (the amount the option is "worth" in terms of the potential for future price movements). Therefore, the correct choice is C, which states that the intrinsic value plus the time value are the components that make up the value of a European style call option.

The Value of a European Style Call Option Is the Sum