Homework 5 instructions help Question 1 of 1 Save Exit Subm

Homework #5 instructions help Question 1 (of 1) Save & Exit Submit value 10.00 points A call option with a strike price of $74 on a stock selling at $91 costs $18.9. What are the call option\'s intrinsic and time values? (Round your answers to 2 decimal places.) Intrinsic value Time value References eBook& Resources Worksheet Learning Objective: 16-01 Identify the features of an option that affect its market value

Solution

1. Intrinsic value of a call option = underlying price - strike price

= 91-74 = 17

2. Time value = Premium - Intrinisic value

=18.9-17

   =1.9