Which of the Following Statements Is True When Comparing the Payoffs

question 5

Multiple Choice

Which of the following statements is true when comparing the payoffs at maturity of a long forward contract with a long position in a call option,assuming the strike price of the option is the same as the delivery price in the forward contract?

• A)The maximum (i.e. ,best-case)payoff of the forward contract exceeds that of the option.
• B)The minimum (i.e. ,worst-case)payoff of the forward contract exceeds that of the option.
• C)The minimum payoff of the option exceeds that of the forward contract.
• D)The maximum payoff of the option exceeds that of the forward contract.