A stock with a current market price of $50 and a strike price of $45 has an associated call option priced at $6.50. This call has an intrinsic value of ________ and a time value of ________.
A) $5; $1.50
B) $1.50; $5
C) $0; $6.50
D) $6.50; $0

Question

Quizplus · Accepted Answer

Intrinsic value = Max (0, 50 − 45) = $5
Time value = Call premium − Intrinsic value = $6.50 − $5 = $1.50

A Stock with a Current Market Price of $50 and a Strike