ICMA Exam FMFQ Topic 3 Question 63 Discussion

Actual exam question for ICMA's FMFQ exam

Question #: 63
Topic #: 3

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 Fernanda at Aug 06, 2024, 05:45 AM

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Roy

3 months ago

I think it's EUR 3.80, the whole premium

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Kerry

3 months ago

I believe the time value is EUR 3.00

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Arminda

3 months ago

I agree with Carin, it's EUR 0.80

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Carin

3 months ago

I think the time value is EUR 0.80

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Beth

3 months ago

I think it's EUR 3.80, the whole premium

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Victor

4 months ago

Haha, Fausto, you almost had me there! But the time value is the premium minus the intrinsic value, which is EUR 3.00. Nice try, though!

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Lon

3 months ago

Thanks for the clarification, I almost got confused there!

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Shalon

3 months ago

Yeah, the time value is EUR 3.00 because the option is in-the-money.

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Ellen

3 months ago

I thought it was EUR 3.80, but you're right, it's EUR 3.00.

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Yuonne

4 months ago

I believe the time value is EUR 3.00

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Yuriko

4 months ago

I agree with Celeste, it's EUR 0.80

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Fausto

4 months ago

Hold up, folks. Isn't the time value just the premium itself, since the option is in-the-money? I'm going with option B.

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Marvel

2 months ago

Option B is correct, the time value is equal to the premium in this case.

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Jutta

2 months ago

Yes, the time value is the premium, so option B is the right choice.

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Solange

2 months ago

I agree, the time value is the premium, so option B is correct.

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Lajuana

3 months ago

I think the time value is just the premium itself, so I'm going with option B.

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Jani

4 months ago

This one's a no-brainer. If the option is in-the-money, the time value is the premium minus the intrinsic value, which is EUR 3.00. Easy peasy!

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Remona

4 months ago

I agree with Audry. The time value is the amount the option is worth above its intrinsic value, which is EUR 3.00 in this case.

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Wilda

3 months ago

Yes, that's correct. The time value is the premium above the intrinsic value.

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Salome

4 months ago

I think the time value is EUR 3.00.

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Celeste

4 months ago

I think the time value is EUR 0.80

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Audry

4 months ago

Option C is the correct answer. The time value of an in-the-money option is the difference between the option premium and the intrinsic value, which in this case is EUR 3.00.

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Ettie

3 months ago

D) EUR 0.80

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Alex

4 months ago

C) EUR 3.00

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Karina

4 months ago

B) EUR 3.80

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