Lucie Wants to Have the Option to Buy 1,000 Shares

question 15

Multiple Choice

Lucie wants to have the option to buy 1,000 shares of stock at a set price any time up to a given date. Lucie should purchase:

• A) 10 calls.
• B) 100 calls.
• C) 1,000 calls.
• D) 100 puts.
• E) 1,000 puts.

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Definitions:

Stock-Financed Deal

A transaction, often in mergers and acquisitions, where payment is made in the form of the acquiring company's stock.

Incremental Value

The additional or excess value that an activity, project, or entity generates compared to a baseline scenario.

Shares Outstanding

The total number of shares of a company that are currently owned by investors, including restricted shares.

Equity-Financed

A method of funding a company's operations by issuing shares to investors, rather than taking on debt.