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b. D Corp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate
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b. D Corp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of the time premium between the August and October options.

User Katie Melosto
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Answer:

The value of the time premium between the August and October options is $0.50

Step-by-step explanation:

A time premium or time value is the amount by which the price of a stock option exceeds its intrinsic value.

To calculate the time premium between August and October we will Subtract October extrinsic value - August extrinsic value

Time premium = 6.25 - 5.75 = $0.50

User MageWind
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