Before expiration,the time value of an in the money call option is always
A)equal to zero.
B)positive.
C)negative.
D)equal to the stock price minus the exercise price.
E)none of the above.

Question

Quizplus · Accepted Answer

The time value of an in the money call option is made up of intrinsic value and time value. Intrinsic value is the difference between the stock price and exercise price, while time value is the premium paid for the possibility of the stock price increasing further before expiration. Since the option is in the money, it has intrinsic value, and the time value is positive as investors are willing to pay a premium for the potential further increase in stock price.

Before Expiration,the Time Value of an in the Money Call