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An at-the-money call with positive time to expiry has:
AZero intrinsic value and zero time value
BNegative intrinsic value and positive time value
CPositive intrinsic value and zero time value
DZero intrinsic value and positive time value
Answer & Solution
Correct answer: D. Zero intrinsic value and positive time value
1. Identify what the question asks: this concept maps to timevalue (§6.4).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 9 "Derivatives Analysis and Valuation"_
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