GCC Corporation Is Planning to Issue Options to Its Key

question 19

Multiple Choice

GCC Corporation is planning to issue options to its key employees,and it is now discussing the terms to be set on those options.Which circumstance would decrease the value of the options,other things held constant?

• A)GCC's stock price becomes more risky (higher variance).
• B)The exercise price of the option is increased.
• C)The life of the option is increased, i.e., the time until it expires is lengthened.
• D)The government takes actions that increase the risk-free rate.

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Definitions:

Lawrence Kohlberg

An American psychologist best known for his theory of stages of moral development.

Cognitive Structures

Mental frameworks that individuals use to organize and interpret information, guiding how they perceive the world.

Assimilation

In psychology, a cognitive process where individuals integrate new information into existing frameworks or schemas.

Piaget's Theory

A theory of cognitive development that describes how children's thinking evolves in stages as they interact with their environment.