Suppose that Nielson Motors stock is trading for $50 per share and that Nielson pays no dividends.What is the minimum possible price for an American put option on Nielson Motors with a strike price of $70?
A)$0
B)$20
C)$50
D)infinite

Question

Quizplus · Accepted Answer

The minimum possible price for an American put option is the intrinsic value, which is the difference between the strike price and the stock price. In this case, the intrinsic value is $70 - $50 = $20, so the minimum possible price for the put option is $20.

Suppose That Nielson Motors Stock Is Trading for $50 Per