CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

The lower bound on a European call price is the greater of zero and ______.

A. the underlying price minus the exercise price
B. the present value of the exercise price minus the underlying price
C. the underlying price minus the present value of the exercise price
Correct Answer: C

European options cannot be exercised until maturity, so the exercise price is adjusted to reflect that the exercise price can be paid and the underlying received only at expiration.

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