Executive Compensation Often Comprises Stock Options

question 2

Multiple Choice

Executive compensation often comprises stock options.These options have vesting periods,and may not be exercised for a while.Which of the following actions might an executive take to help her mitigate the risk of her stock option grants?

• A)Enter into an equity swap where she receives the company's share price returns in exchange for paying Libor.
• B)Short futures on a broad market index.
• C)Short her own company's stock.
• D)Buy put options on her own stock.

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Definitions:

Raw Materials Inventory

Goods or components that a company uses in the manufacture of finished products.

Completed Goods

Final products that have undergone the manufacturing process and are ready to be sold or distributed.

Cost

The total expense incurred in producing a product or providing a service, including materials, labor, and overhead charges.

Manufacturing Inventories

Materials, work-in-progress, and finished goods that a company holds for the purpose of future production or sale.