What Happens to an Option If the Underlying Stock Has

question 65

Multiple Choice

What happens to an option if the underlying stock has a 2-for-1 split?

• A)There is no change in either the exercise price or in the number of options held.
• B)The exercise price will adjust through normal market movements; the number of options will remain the same.
• C)The exercise price would become half of what it was and the number of options held would double.
• D)The exercise price would double and the number of options held would double.
• E)There is no standard rule - each corporation has its own policy.

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Definitions:

Adolescent Drug Use

The consumption of legal or illegal substances by individuals in their teenage years, which can significantly affect mental and physical development.

Tolerance

The acceptance of an element, habit, or practice without negative reaction, or the body's diminishing response to a substance due to repeated exposure.

Increasing Amounts

A term referring to any situation or parameter that is continuously growing or becoming greater in number, size, value, or volume.

Drug

A substance that has a physiological effect when ingested or otherwise introduced into the body, often used for medicinal purposes.