Which one of the following describes the lower bound of a call's value?

Question

Quizplus · Accepted Answer

The lower bound of a call's value is determined by the difference between the stock price and the exercise price, or zero if this difference is negative. This is because an investor would not exercise the call option if the stock price is below the exercise price (as it would yield a loss), so the minimum value of the call is zero. Therefore, the answer is B, as it describes this calculation of the lower bound.

Which One of the Following Describes the Lower Bound of a Call's