Asked by Courtney Venters on Apr 26, 2024
Verified
The time value of a put option isI) the difference between the option's price and the value it would have if it were expiring immediately.II) the same as the present value of the option's expected future cash flows.III) the difference between the option's price and its expected future value.IV) different from the usual time value of money concept.
A) I
B) I and II
C) II and III
D) II
E) I and IV
Time Value
Time Value is a concept in finance that represents the additional value of an investment due to the potential earnings from the passage of time, often associated with the time value of money theory.
Present Value
The current value of a future sum of money or stream of cash flows, discounted at a specified rate of return.
- Locate and appraise the core and time-dependent values of options.
Verified Answer
ML
michael layneApr 30, 2024
Final Answer :
E
Explanation :
The time value of a put option is the difference between the option's price and the intrinsic value it would have if it were expiring immediately (I), and it is indeed different from the usual time value of money concept, which involves discounting future cash flows to their present value (IV).
Learning Objectives
- Locate and appraise the core and time-dependent values of options.
Related questions
An American-Style Call Option with Six Months to Maturity Has ...
An American-Style Call Option with Six Months to Maturity Has ...
The Intrinsic Value of an Out-Of-The-Money Call Option Is Equal ...
The Intrinsic Value of an At-The-Money Call Option Is Equal ...
An American-Style Call Option with Six Months to Maturity Has ...