A 45 call option on a share priced at $50 is priced at $6.50. This call has an intrinsic value of ________ and a time value of ________.
A)$6.50; $0
B)$5.00; $1.50
C)$1.50; $5.00
D)$0; $6.50

Question

Quizplus · Accepted Answer

The intrinsic value of the call option is calculated as the difference between the current stock price and the strike price, multiplied by the number of shares per contract.

In this case, the intrinsic value is:
($50 - $45) x 100 = $500

The time value is calculated as the difference between the option price and the intrinsic value.

In this case, the time value is:
$6.50 - $5.00 = $1.50

Therefore, the correct answer is B, with an intrinsic value of $500 and a time value of $1.50.

A 45 Call Option on a Share Priced at $50