What Happens to an Option If the Underlying Stock Has

question 19

Multiple Choice

What happens to an option if the underlying stock has a 2-for-1 split?

• A) There is no change in either the exercise price or in the number of options held.
• B) The exercise price will adjust through normal market movements; the number of options will remain the same.
• C) The exercise price would become one-half of what it was, and the number of options held would double.
• D) The exercise price would double, and the number of options held would double.
• E) There is no standard rule-each corporation has its own policy.

---

Definitions:

Strategic Leadership

Leadership that focuses on long-term success through visioning, planning, and fostering an environment conducive to adaptation, innovation, and growth.

Guardian of Trade-offs

A role or principle involving the management and balance of competing interests or resources in decision-making processes.

Sense of Urgency

The perceived need to act immediately in order to meet objectives or respond to opportunities and threats.

Business Strategy

A plan or set of decisions that guide a company in achieving specific business objectives and gaining a competitive edge.