ICMA Exam FMFQ Topic 3 Question 63 Discussion

Actual exam question for ICMA's FMFQ exam

Question #: 63
Topic #: 3

[All FMFQ Questions]

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, 06:45 AM

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Ellen

3 days ago

Hmm, this looks like a classic options pricing question. I think I can handle this - I just need to remember the formula for time value.

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Elli

7 days ago

This looks like a tricky one. I'll need to carefully review the SFRA best practices to determine which option is the most appropriate.

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Roy

1 years ago

I think it's EUR 3.80, the whole premium

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Kerry

1 years ago

I believe the time value is EUR 3.00

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Arminda

1 years ago

I agree with Carin, it's EUR 0.80

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Carin

1 years ago

I think the time value is EUR 0.80

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Beth

1 years ago

I think it's EUR 3.80, the whole premium

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Victor

1 years 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

1 years ago

Thanks for the clarification, I almost got confused there!

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Shalon

1 years ago

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

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Ellen

1 years ago

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

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Yuonne

1 years ago

I believe the time value is EUR 3.00

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Yuriko

1 years ago

I agree with Celeste, it's EUR 0.80

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Fausto

1 years 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

1 years ago

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

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Jutta

1 years ago

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

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Solange

1 years ago

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

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Lajuana

1 years ago

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

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Jani

1 years 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

1 years 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

1 years ago

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

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Salome

1 years ago

I think the time value is EUR 3.00.

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Celeste

1 years ago

I think the time value is EUR 0.80

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Audry

1 years 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

1 years ago

D) EUR 0.80

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Alex

1 years ago

C) EUR 3.00

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Karina

1 years ago

B) EUR 3.80

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