Asked by Ntswaki Mereki on May 12, 2024
Verified
The time value of a call option isI) 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.
A) I
B) I and II
C) II and III
D) II
E) I and IV
Time Value
The idea that money currently in hand is more valuable than the same sum received in the future because of its ability to earn more over time.
Call Option
A financial contract giving the buyer the right, but not the obligation, to purchase a stock or other asset at a specified price within a certain time frame.
Present Value
The current value of a future amount of money or stream of cash flows given a specified rate of return.
- Pinpoint and quantify the core and time-related values of options.
Verified Answer
Learning Objectives
- Pinpoint and quantify the core and time-related values of options.
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