Before expiration, the time value of a call option is equal to
A) zero.
B) the actual call price minus the intrinsic value of the call.
C) the intrinsic value of the call.
D) the actual call price plus the intrinsic value of the call.

Question

Quizplus · Accepted Answer

The time value of a call option is the difference between the option's price (its premium) and its intrinsic value (the value if exercised immediately). It represents the extra amount an investor is willing to pay over the intrinsic value, based on the chance that the stock price will increase before expiration.

Before Expiration, the Time Value of a Call Option Is