If the Owner of a Call Option with a Strike

question 82

Multiple Choice

If the owner of a call option with a strike price of $35 finds the stock to be trading for $42 at expiration, then the option:

• A) expires worthless.
• B) will not be exercised.
• C) is worth $7 per share.
• D)cost too much initially.

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Definitions:

Declines to Declare Dividends

The decision by a company's board of directors not to distribute earnings to shareholders in the form of dividends.

Fundamental Change

A significant alteration in the operations, structure, or financial standing of a company that can affect its stakeholders.

Minority Shareholder

A minority shareholder is someone who owns less than 50% of a company's shares and therefore does not have a controlling interest in the company.

Preemptive Rights

Rights that allow existing shareholders the opportunity to buy new shares of a company's stock before it is offered to the public, often to maintain their percentage of ownership.