Which of the Following Statements Is True About a Share

question 50

Multiple Choice

Which of the following statements is true about a share option:

• A) The nature of the holder's right in relation to the option is affected by the likelihood that the option will be exercised.
• B) The nature of the holder's obligations in relation to the option are affected by the likelihood that the option will be exercised.
• C) The likelihood of the option being exercised does not affect its classification as a financial liability.
• D) The likelihood of the option being exercised does affect its classification as a financial liability.

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Definitions:

Permanent Income Hypothesis

Formulated by Milton Friedman, it states that the strongest influence on consumption is one’s estimated lifetime income.

Paradox of Thrift

An economic theory suggesting that while saving is beneficial to an individual, increased savings by the entire population can lead to a decrease in aggregate demand, ultimately reducing savings at a macroeconomic level.

Theory of the Leisure Class

A socio-economic theory presented by Thorstein Veblen, which critiques consumerism and status-driven consumption, emphasizing the social uses of wealth and leisure to display status rather than for utility.

Theory of the Multiplier

An economic theory suggesting that an initial increase in spending leads to increased income and consumption, further magnifying economic activity.