Chapter 03 · Section 3.1

Time Value

                     Option A          Option B          Option C 
   
Option type:         American Call     American Call     American Call  
Exercise price:      $ 290             $ 290             $ 290         
Underlying asset:    stock A           stock A           stock A        
Price of stock A:    $ 300             $ 300             $ 300          
Expiration date:     March             June              September     
Today's date:        March             March             March  

Time value of the above options is:

a) the same in options A, B and C.
b) the same in options A and B.
c) the same in options A and C.
• d) the same in options B and C.
  No. Options A, B and C have different expiration dates. The greater the time to expiration, the greater the time value component of the premium.
  e) different in options A, B and C.

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