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:

Inductive

A method of reasoning in which general conclusions are drawn from specific instances or observations.

Sound Argument

An argument that is both valid (correctly structured) and has all true premises, leading to a true conclusion.

Deductive Argument

An argument that claims its conclusion necessarily follows from the premises.

Inductive Argument

An argument that only claims that its conclusion probably follows from the premise.