IBM shares are currently selling at $75.The premium on a call option on IBM shares with an exercise price of $60 will be:
A)Less than $15
B)Greater than $15
C)Equal to $15
D)Zero

Question

Quizplus · Accepted Answer

The premium on a call option is the intrinsic value plus any time value. Since the stock price ($75) is above the exercise price ($60), the intrinsic value is $15. The premium will be greater than $15 because it also includes the time value.

IBM Shares Are Currently Selling at $75