Corporation Is Planning to Issue Options to Its Key Employees

question 17

Multiple Choice

Corporation is planning to issue options to its key employees, and it is now discussing the terms to be set on those options.Which of the following actions would decrease the value of the options, other things held constant?

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

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Definitions:

Social Interactions

The process by which individuals act and react in relation to others, involving exchanges that are foundationally human and essential for the development of societies.

Primary Motives

Fundamental drives that are biologically based, necessary for survival, such as hunger, thirst, and avoidance of pain.

Drive-Reduction Theory

A psychological theory that posits human behavior is motivated by the desire to reduce internal states of tension caused by unmet needs.

Social Learning Theorists

Refers to experts in psychology who study how people learn through observing others, emphasizing that learning can occur within a social context without direct reinforcement.