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SIE: Options
SIE practice questionhardOptions—Time Value

If an option's premium is $5, its intrinsic value is $3, what is its time value?

  1. A$3
  2. B$2✓ Correct answer
  3. C$5
  4. D$8
Explanation

Why B$2

Time value is premium minus intrinsic value ($5 - $3 = $2). $3 is intrinsic, $5 is total premium, $8 is not related.

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