Final answer:
The time value of the call option is the premium minus the intrinsic value, which is 1.70 cents in this case.
Step-by-step explanation:
The subject of the question involves calculating the time value of an options contract in finance, a topic that is often covered in business courses.
The time value of an option represents the additional amount that traders are willing to pay over the intrinsic value due to the time left to expiry. The intrinsic value is the amount the option is in the money, which, in the case of a call option, is the current price of the underlying asset minus the strike price. If the option is out of the money, the intrinsic value is zero.
To find the time value, you subtract the intrinsic value from the premium paid for the option. In this case, since the spot price is 110.53 cents per 100 yen, and the strike price is 110 yen, the intrinsic value is 0.53 cents. This is because a call option allows the holder to buy at the strike price. Here, the holder can buy for 110 and immediately sell for the current price of 110.53. The premium paid is 2.23 cents, so the time value is calculated by subtracting the intrinsic value of 0.53 cents from the paid premium - hence the time value of the call option is 1.70 cents.