A call with a strike price of ($40) is available on a stock currently trading for ($35).
Question:
A call with a strike price of \($40\) is available on a stock currently trading for \($35\). The call expires in one year and the risk-free rate of return is 10%.
The lower bound on this call’s value
a. is 0.
b. is \($5\) if the call is American-style.
c. is \($1.36\) if the call is European-style.
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