The Current Market Value of a Stock Option Contract to Purchase

question 231

Multiple Choice

The current market value of a stock option contract to purchase 1,000 shares of IBM stock at a price of $100 that can be exercised five years from now would

• A) increase if the expected future price of IBM stock rose.
• B) increase if the expected future price of IBM stock fell.
• C) decrease if the expected future price of IBM stock rose.
• D) remain unchanged regardless of the expected future price of IBM stock.

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Definitions:

Selective Attention

The cognitive process of focusing on certain stimuli in the environment while ignoring others.

Perception

The process by which individuals organize and interpret sensory information to give meaning to their environment.

Negative Reinforcement

A behavioral strategy that involves the removal of an unpleasant stimulus to increase the likelihood of a desired response.

Social Identity Theory

A psychological theory that examines how individuals' self-concepts are influenced by their membership in social groups.