1. The time value of an option is most accurately described as:
A being greatest at the option’s expiration date.
B the entire option premium for an out-of-the-money option.
C the amount by which the intrinsic value exceeds the option premium.
D being typically greater than the option’s intrinsic value for an in-the-money option.
2. An American call option on a stock with 91 days until expiration has an exercise price of $65. The underlying stock is trading at $68 and the risk-free rate is 5%.
The theoretical minimum price for this option is closest to:
A $0.
B $2.86.
C $3.00.
D $3.79.