Explanation:
The lower pricing bound of an American put on a non-dividend-paying stock is . In this case, the lower bound is P \geq (\`110 - \106`) = \`4.00`$.
(Book 3, Module 39.2, LO 39.d)
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Question 33
SCU stock is currently priced at $106 per share, and the risk-free interest rate is 3.25%. Assuming that SCU does not pay any dividends, what is the lower bound of an American put option on SCU that expires in three months and has an exercise price of $110?
A
$0.
B
$0.48.
C
$3.11.
D
$4.00.
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