Which One of the Following Is the Lower Price Bound

question 100

Multiple Choice

Which one of the following is the lower price bound for the intrinsic value of an American put option on a stock?

• A)0
• B)strike price
• C)stock price
• D)Max(S − K, 0)
• E)Max(K − S, 0)

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Definitions:

Carrying Costs

Expenses associated with maintaining inventory, including storage, insurance, and opportunity costs.

Cycle Counting

An approach to stock audit where a limited selection of the inventory at a defined site is enumerated on a chosen date.

Service Level

A measure of the performance of a service system, often defined in terms of responsiveness to customer needs and reliability.

Ordering Costs

The expenses associated with the process of requisitioning, purchasing, and receiving goods and services; includes costs of paperwork, communication, and inspections.