Question

The time value of a call option is I) the difference between the option's price and...

The time value of a call option is

I) the difference between the option's price and the value it would have if it were expiring immediately.

II) the same as the present value of the option's expected future cash flows.

III) the difference between the option's price and its expected future value.

IV) different from the usual time value of money concept.

Homework Answers

Answer #1

Answer : Both I and IV are correct .

Reason :

Time value of Call Option is the difference between the option's price and the value it would have if it were expiring immediately and Time value of call option is not same concept as  time value of money concept.. Therefore Both Option I) the difference between the option's price and the value it would have if it were expiring immediately and Option IV) different from the usual time value of money concept. are correct Options  

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