Describes the time value of the option described

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Problem 1: Pinder Ltd shares are currently trading at $4.20 per share. An American-style call option written on Pinder Ltd shares with an exercise price of $3.50 and 2 months to go to expiry is currently trading at $0.90 per option. Which of the following statements accurately describes the time value of the option described.

a) The time value of the option is less than $0.70 per share b) The time value of the option is equal to $0.70 per share
c) The time value of the option is greater than $0.70 per share
d) Holding all other variables constant, the time value of the option will decrease with a decrease in the remaining life of the option.
e) More than one of the above statements are correct.

Reference no: EM132941072

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