​When a Call Option Is Exercised

question 42

Multiple Choice

​When a call option is exercised,

• A) ​the firm issues new stock
• B) the writer supplies the stock
• C) the firm's earnings are diluted
• D) ​the option is converted into stock

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Definitions:

Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, expressed as a ratio or percentage.

Tax

Mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures.

Buyer

An individual or entity that purchases goods or services for personal use or consumption.

Tax

Tax is a compulsory financial charge levied by a government on individuals, corporations, or transactions to fund public expenditures.