Which of the Following Is the Lowest Possible Value of an American

question 44

Multiple Choice

Which of the following is the lowest possible value of an American put on a stock with no dividends?

• A)X(1 + r)^-T
• B)X
• C)Max[0,X(1 + r)^-T - S₀]
• D)Max(0,X - S₀)
• E)none of the above

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Definitions:

Financial Break-Even

The point at which total revenues are equal to total operational and financial costs, indicating a project or company is not losing money but not making profit either.

Required Return

The minimum expected return an investor seeks on an investment, considering the risk associated with it.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue is contributing to fixed costs and profit.