Which of the Following Statements Is True of American Options

question 24

Multiple Choice

Which of the following statements is true of American options?

• A) The lower bound on the price of a call option on stock is the price of the stock.
• B) The lower bound on the price of a call option on stock could be zero.
• C) To prevent arbitrage, the value of the call today must be less than the stock price minus the exercise price.
• D) After expiration, an option on stock will be worth more than the option's intrinsic value.
• E) The upper bound on the price of a call option is its intrinsic value.

---

Definitions:

Prefixes

Word parts added to the beginning of a word to change its meaning or create a new word.

Universal Sound Units

The basic elements of phonology that are recognized across all human languages.

Morphemes

The smallest grammatical units in a language that carry meaning, which can be words or parts of words, such as prefixes or suffixes.

Remote Associates Test

A creativity test that measures the ability to see associations between seemingly unrelated words.