The value of a European style call option is the sum of two components, the
A)present value plus the intrinsic value.
B)time value plus the present value.
C)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 determined by both its intrinsic value (the difference between the underlying asset's price and the strike price) and its time value (the amount of time remaining until expiration). Therefore, the correct choice is C, which states that the option's value is equal to the intrinsic value plus the time value. The other choices are incorrect, as they either do not include one of these components (choices A and D) or they incorrectly state that the present value should be included in the calculation (choice B).

The Value of a European Style Call Option Is the Sum