SIE practice questionhardOptions—Time Value
If an option's premium is $5, its intrinsic value is $3, what is its time value?
- A$3
- B$2✓ Correct answer
- C$5
- 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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