Simon Believed That He Might Want to Buy Certain Shares

question 3

Multiple Choice

Simon believed that he might want to buy certain shares from Melinda in the near future.On June 1.He therefore paid her $1000 in exchange for an option to purchase 5000 shares in Acme Inc at $10 each on or before October 1.Which of the following statements is TRUE?

• A)If the market value of the shares immediately dropped to $5 each and stayed there throughout the option period,Simon would be obligated to buy 5000 shares from Melinda at double their actual value.
• B)If the market value of the shares immediately increased to $20 each and stayed there throughout the option period,Melinda might be obligated to sell 5000 shares to Simon at half of their market value.
• C)If the market value of the shares immediately increased to $20 each,Melinda could revoke her offer to sell the shares any time before Simon accepted it.
• D)The option would create enforceable obligations only if and when Simon agreed to buy the shares.
• E)Simon will be entitled to enforce the option only if Melinda cannot find any other potential buyers.

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