Executive Options Are Different from Standard Options in a Number

question 40

Multiple Choice

Executive options are different from standard options in a number of ways.Consider the following two statements:
(i) A freeze-out period lowers the value of a standard option compared to an executive option.
(ii) The Black-Scholes formula cannot be used to value executive options, if the volatility of equity
Changes randomly over time.

• A)(i) is correct, (ii) is incorrect.
• B)(i) is incorrect, (ii) is correct.
• C)Both (i) and (ii) are correct.
• D)Both (i) and (ii) are incorrect.
• E)only (ii) is correct, but only if the option comes with a freeze out.

---

Definitions:

Belong

The innate human need to be an accepted member of a group, whether it's family, friends, or a larger social context.

Affiliation Motive

The innate need to form and maintain interpersonal relationships and feel connected to others.

Threatened

Feeling threatened involves experiencing fear or anxiety over a perceived risk or danger to one's safety, well-being, or position.

Lonely

Lonely describes a feeling of sadness or discomfort due to a lack of companionship or separation from others.