What Is the Lower Bound of a European Call Option

question 22

Multiple Choice

What is the lower bound of a European call option on a futures contract where f₀ is the futures price and X is the exercise price? Assume f₀ is greater than X.

• A)the difference between f₀ and X
• B)zero
• C)the present value of the difference between f₀ and X
• D)the ratio of f₀ to X
• E)none of the above