Final answer:
The intrinsic value of the call option is $5, representing the difference between the stock price and the exercise price. The time value is $2.44, calculated as the difference between the option's price and its intrinsic value.
Step-by-step explanation:
Calculating Intrinsic Value and Time Value of a Call Option
To calculate the intrinsic value of the call option, we need to subtract the exercise price from the current stock price, provided that the stock price is above the exercise price. In this case, the intrinsic value is the difference between the current stock price of $60 and the exercise price of $55, which is $5 ($60 - $55 = $5). The time value is the remaining portion of the option's price after accounting for the intrinsic value. Given the option is priced at $7.44, the time value is the difference between the option price and the intrinsic value, which gives us $2.44 ($7.44 - $5 = $2.44).
The intrinsic value of the option is $5, and the time value is $2.44.