Sam Is Considering Purchasing a Call Option on ABC Stock

question 26

Multiple Choice

Sam is considering purchasing a call option on ABC stock. The call has a premium of $3, an exercise price of $50, and ABC is trading at $51 per share. Which of the following statements about the call option is correct?

• A) The call has an intrinsic value of $1 and a time value of $2.
• B) The call has an intrinsic value of $0 and a time value of $3.
• C) The call has an intrinsic value of $3 and a time value of $2.
• D) The call has an intrinsic value of $0 and a time value of $1.

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