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Which statements accurately describes the time value

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Question - Sally Ltd shares are currently trading at $3.20 per share. An American-style put option written on Sally Ltd shares with an exercise price of $4.50 and with two months to expiry is currently trading at, and valued at, $1.40. Which one of the following statements accurately describes the time value of the option described above?

a) The time value of the option is equal to $1.30 per share.

b) The time value of the option is equal to $0.10 per share.

c) The time value of the option is greater than $1.30 per share.

d) Holding all other variables constant, the time value of the option will increase with a decrease in the remaining life of the option.

e) More than one of the above statements are correct

Reference no: EM133031082

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