Final answer:
The lower bound on a call option's value is the greater of the stock price minus the exercise price or zero, as this represents the potential profit or zero value if the option is worthless. Therefore correct option is B
Step-by-step explanation:
The lower bound on a call option's value is defined as the greater of the stock price minus the exercise (or strike) price, or zero. This is because a call option gives you the right, but not the obligation, to buy the underlying asset at the strike price. If the stock price is higher than the strike price, then the intrinsic value of the call is the difference between the two, which represents a potential profit if the call were exercised. Hence, the value cannot be negative as the worst-case scenario is that the call is worthless (i.e., has zero value) if the stock price is at or below the strike price. Therefore, the correct answer is b. greater of the stock price minus the exercise price or zero.