The Time Value of an Option Is Equal To

question 74

Multiple Choice

The time value of an option is equal to:

• A) The difference between the option's market price and its intrinsic value.
• B) The difference between the option's intrinsic value and its market price.
• C) The risk-free interest rate in the economy.
• D) The net present value of the option's cash flows.
• E) The net present value of the option's cash flows, discounted at the risk-free interest rate.

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Definitions:

Automobiles

Motor vehicles with four wheels designed primarily for passenger transportation on roads.

Supply

The total quantity of a good or service that businesses are willing and able to sell at a given price level.

Product

Any item or service that is created through a process and is offered for sale to consumers.

Resources

Inputs used in the production of goods and services, such as labor, capital, land, and technology.