GCC Corporation Is Planning to Issue Options to Its Key

question 22

Multiple Choice

GCC 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 becomes more risky (higher variance).
• 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 government takes actions that increase the risk-free rate.

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Definitions:

Midaxillary Line

An imaginary line running vertically down the surface of the body passing through the apex of the axilla (armpit).

Cardiology

The study of the heart and its diseases.

Voltage

A measure of electromotive force.

Electromotive Force

A difference in potential that provides the energy per unit charge necessary to move charge from one point to another, commonly used in relation to electric circuits.