Simon Believed That He Might Want to Buy Certain Shares

question 2

Multiple Choice

Simon believed that he might want to buy certain shares from Melinda in the near future. On June 1st, he therefore paid her $1000 in exchange for an option to purchase 5000 shares in Acme Inc at $10 each on or before October 1st. Which of the following statements is TRUE?

• A) If the market value of the shares immediately dropped to $5 each and stayed there throughout the option period, Simon would be obligated to buy 5000 shares from Melinda at double their actual value.
• B) Simon will be entitled to enforce the option only if Melinda cannot find any other potential buyers.
• C) If the market value of the shares immediately increased to $20 each and stayed there throughout the option period, Melinda might be obligated to sell 5000 shares to Simon at half of their market value.
• D) The option would create enforceable obligations only if and when Simon agreed to buy the shares.
• E) If the market value of the shares immediately increased to $20 each, Melinda could revoke her offer to sell the shares any time before Simon accepted it.

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Definitions:

Autotrophs

Organisms that produce their own food from inorganic substances using light or chemical energy, with plants being the most common examples.

Environment

The surrounding conditions and factors that affect living organisms and ecosystems, including both natural and man-made elements.

Carbon

Carbon is a chemical element with symbol C and atomic number 6, essential to all known life forms and the basis of organic chemistry, forming a vast number of compounds including carbon dioxide and organic molecules.

Organic Compounds

Chemical compounds containing carbon atoms bonded to hydrogen atoms with possible addition of other elements such as oxygen, nitrogen, and sulfur; fundamental to all known life forms.