The Value of an Option Is Equal to The

question 37

Multiple Choice

The value of an option is equal to the:

• A) intrinsic value minus the time premium.
• B) time premium plus the intrinsic value.
• C) implied standard deviation plus the intrinsic value.
• D) summation of the intrinsic value, the time premium, and the implied standard deviation.
• E) summation of delta, theta, vega, and rho.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a public marketplace.

Shares

Units of ownership interest or equity in a corporation or financial asset.

Retained Earnings

The portion of a company's profits that is held or retained for reinvestment in the business, rather than being paid out as dividends.

Common Stock

Equity securities that represent ownership in a corporation, providing voting rights and a share in the company's profits through dividends.