For an American call option,A and B in the graph are
A)time value and intrinsic value.
B)intrinsic value and time value.
C)in-the-money and out-of-the money.
D)none of the options

Question

For an American call option,A and B in the graph are 
A)time value and intrinsic value. 
B)intrinsic value and time value. 
C)in-the-money and out-of-the money. 
D)none of the options

Quizplus · Accepted Answer

For an American call option, the intrinsic value is the difference between the underlying asset's current price and the option's strike price. The time value is the value of the option beyond its intrinsic value, which is influenced by factors such as time to expiration, volatility, and interest rates. Therefore, B is the correct choice with intrinsic value given first, followed by the time value.

For an American Call Option,A and B in the Graph