What Are the Upper and Lower Bounds for an American

question 47

Essay

What are the upper and lower bounds for an American call option?
Explain what would happen in each case if the bound was violated.

---

Definitions:

Machine-Hours

An indicator of the duration a machine is in use over a specific timeframe.

Selling Price

The amount of money for which a product or service is sold to the customer.

Plantwide Predetermined Rate

A single overhead absorption rate calculated for an entire factory, used to allocate overhead costs to products.

Machine-Hours

A measure of the amount of time a machine is operated, used in the calculation of manufacturing costs and allocation.