An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $43. The call premium is $14. What is the time value of the call?
A) $8
B) $14
C) $0
D) $6
E) Cannot be determined without more information

Question

Quizplus · Accepted Answer

The time value of a call option is calculated by subtracting the intrinsic value from the call premium. The intrinsic value is the difference between the stock price ($43) and the strike price ($35), which is $8. The call premium is $14. Therefore, the time value is $14 - $8 = $6.

An American-Style Call Option with Six Months to Maturity Has