John and Randy Form a Company with Assets Worth $900

question 103

Multiple Choice

John and Randy form a company with assets worth $900. They each have two shares of stock. The firm sells Cheri a warrant for one share of stock. The warrant has an exercise price of $200 and expires in one year. In one year, the firm's assets are worth $1,200 immediately before expiration of the warrant. Should Cheri exercise the warrant?

• A) No, because the option is out of the money.
• B) Yes, because she stands to gain $40 by exercising.
• C) Yes, because she stands to gain $80 by exercising.
• D) Yes, because she stands to gain $100 by exercising.
• E) We can't tell without knowing what she paid for the warrant.

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Definitions:

United States v. Windsor

A landmark Supreme Court case in 2013 that struck down Section 3 of the Defense of Marriage Act (DOMA), allowing federal recognition of same-sex marriages.

Supreme Court Decision

A ruling made by the Supreme Court, which is the highest court in a country, especially referring to judgments that have nationwide implications.

Federal Law

Laws passed by the national government of the United States that are applicable throughout the country.

Defense of Marriage Act

A now-invalidated US law that defined marriage as the union between one man and one woman for federal and inter-state recognition purposes.