BLW Corporation Is Considering the Terms to Be Set on the Options

question 16

Multiple Choice

BLW Corporation is considering the terms to be set on the options it plans to issue to its executives.Which of the following actions would decrease the value of the options, other things held constant?

• A) The exercise price of the option is increased.
• B) The life of the option is increased, i.e., the time until it expires is lengthened.
• C) The Federal Reserve takes actions that increase the risk-free rate.
• D) BLW's stock price becomes more risky (higher variance).
• E) BLW's stock price suddenly increases.

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Definitions:

Water Pollution

The contamination of water bodies such as lakes, rivers, oceans, and groundwater, caused by harmful substances resulting from human activities.

Lake Erie

The fourth-largest lake of the five Great Lakes in North America, known for its fishing industry, recreation, and as a critical source of fresh water.

Experimental Lakes Area

A freshwater research facility in Canada, focusing on the impact of human activity and environmental changes on freshwater ecosystems.

Nitrogen Problem

Environmental and health issues arising from the excess of nitrogen compounds in ecosystems, often due to agricultural runoff and fossil fuel combustion.