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Before expiration, the time value of a call option is equal to Group of answer choices zero. the actual call price minus the intrinsic value of the call. the intrinsic value of the call. the actual call price plus the intrinsic value of the call.

Respuesta :

Parrain

Answer: the actual call price minus the intrinsic value of the call.

Explanation:

The actual price of a call is calculated as the sum of the intrinsic value of the call and the time value of the call option in the manner:

Price of call = Intrinsic value of call + Time value of call

The Time value of the call is therefore:

Change subject of below formula:

Price of call = Intrinsic value of call + Time value of call

Time value of call = Price of call - Intrinsic value of call

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