Which of the Following Statements Is FALSE

question 33

Multiple Choice

Which of the following statements is FALSE?

• A)An alternative to using the Black-Scholes formula is to compute the value of growth options using risk-neutral probabilities.
• B)Future growth options are not only important to firm value,but can also be important in the value of an individual project.
• C)While the Black-Scholes formula values American options,most growth options cannot be exercised at any time.
• D)Out-of-the-money calls are riskier than in-the-money calls,and because most growth options are likely to be out-of-the-money,the growth component of firm value is likely to be riskier than the ongoing assets of the firm.

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Definitions:

Premiums Paid

Amounts paid for insurance coverage or policies over a specified period.

Unexpired Insurance

The portion of an insurance premium that has not yet been used up or has not yet expired, representing a future economic benefit.

Insurance Policy

A contract between an insurer and a policyholder in which the insurer agrees to compensate the policyholder for specific losses in exchange for a premium.

Adjusting Entry

A journal entry made at the end of an accounting period to record unpaid expenses or revenues that have accrued, ensuring the accounts reflect the true financial position.