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Suppose P Is the Current Price of a European Put \le

Question 1

Multiple Choice

Suppose p is the current price of a European put and pA is that for an American put,where the two options have identical terms and conditions and differ only in terms of the early exercise feature.If B = $0.96 is today's price of a zero-coupon bond that matures on the option's expiration date and K = $50 is the strike price,then the following statement is correct:


A) p \le $50 and pA \le 48
B) p \ge $24 and pA \le 25
C) p \le $48 and pA \le 50
D) p \le $48 and pA \ge 48
E) None of these answers are correct.

Correct Answer:

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