The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50 percent (December) and 7.62 percent (January). The times to expiration were 0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no dividends unless indicated.
-What is the time value of the December 105 put?
A)1.30
B)8.30
C)0.00
D)7.00
E)none of the above

Question

The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50 percent (December) and 7.62 percent (January). The times to expiration were 0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no dividends unless indicated.
-What is the time value of the December 105 put?
A)1.30 
B)8.30 
C)0.00 
D)7.00 
E)none of the above

Quizplus · Accepted Answer

The time value of an option is the amount by which the option's price exceeds its intrinsic value. If the December 105 put is priced at 8.30 and the intrinsic value is 7.00 (assuming the underlying is at 98), the time value is 1.30.

The Following Quotes Were Observed for Options on a Given