If the time value and the market value of a call option are $5.00 and $15.00, respectively, then the intrinsic value of the option is $20.

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is calculated by subtracting the stock's current price from the strike price (for in-the-money options). The market value of the option ($15.00) is the sum of its intrinsic value and time value ($5.00), not the other way around. Therefore, the intrinsic value is $10.00 ($15.00 market value - $5.00 time value).

If the Time Value and the Market Value of a Call