ICMA Exam FMFQ Topic 1 Question 52 Discussion

Actual exam question for ICMA's FMFQ exam

Question #: 52
Topic #: 1

You hold a call option on a stock with a strike of EUR 35. The current premium for this option is EUR 3.80 and the underlying stock is trading at EUR 32. How much of this option price represents time value?

ANone as the option is in-the-money

BEUR 3.80

CEUR 3.00

DEUR 0.80

Show Suggested Answer

Suggested Answer: B

by Kristel at Mar 19, 2024, 07:34 PM

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Arthur

5 months ago

Great, I understand now. Thanks for the explanation!

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Gracia

5 months ago

Yes, that's correct. The premium of EUR 3.80 minus the intrinsic value of EUR 3 gives us EUR 0.80 as time value.

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Kirby

5 months ago

So, in this case, the time value would be EUR 0.80, right?

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Isabella

6 months ago

I believe the time value is the difference between the premium and the intrinsic value.

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Arthur

6 months ago

I agree, we need to calculate how much of the option price is time value.

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Gracia

7 months ago

I think the question is about time value of options.

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