Which One of the Following Is the Lower Price Bound

question 91

Multiple Choice

Which one of the following is the lower price bound for the intrinsic value of an American call 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:

Tautology

A statement or formula that is true in every possible interpretation, often due to its repetitive or redundant nature.

Symbolic Notation

The use of symbols and abbreviations to represent logical expressions, statements, and arguments.

Atomic Components

The fundamental elements or parts that make up a larger system, often considered as the most basic and indivisible units.

Contingency

A prospective happening or condition that might occur but is unpredictable with absolute certainty.