When the Right to Purchase Stock in the Future Is

question 44

Multiple Choice

When the right to purchase stock in the future is used as a substitute for a cash bonus, the company is granting

• A) Post-retirement benefits
• B) Compensated absences
• C) Stock options
• D) Post-employment benefits

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Definitions:

Stock Split

A corporate action that increases the number of a corporation's outstanding shares by dividing each share, which in turn diminishes its price.

American Call Option

A financial derivative allowing the buyer the right, but not the obligation, to buy a specific stock or asset at a predetermined price within a certain time period.

Underlying Asset

The security or asset on which a derivative contract is based, influencing its value and characteristics.

Exercise Price

The predetermined price at which an option's underlying asset can be bought or sold.