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Suppose C and P Are the Current Prices of a European

Question 4

Multiple Choice

Suppose c and p are the current prices of a European call and put,while cA and pA are those corresponding to American options.If today's price of the stock underlying the options is S,a zero-coupon bond that matures on the common expiration date for the options is B,and the common strike price is K,then the following statement is INCORRECT:


A) c \ge max(S - BK,0)
B) cA \ge max(S - BK,0)
C) c \ge max(BK - S,0)
D) p \ge max(BK - S,0)
E) pA \ge max(K - S,0)

Correct Answer:

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