If the current closing price of the stock of XYZ, Inc. is $87.50 and the July expiration call options with a strike price of $80 are selling for $9.45, what is the intrinsic value of the option? What is the time value of the option?

What will be an ideal response?

The intrinsic value of a call option is the market price less the strike price, or in this case $7.50. The time value of the option is the option price less the intrinsic value, which in this case is $9.45 less $7.50 or $1.95.