The Value of an Executive Stock Option Will Be Lowered

question 36

Multiple Choice

The value of an executive stock option will be lowered if:

• A)the volatility of the firm's stock returns increases.
• B)the executive improves firm performance causing the stock price to rise.
• C)a freeze-out period is required.
• D)the firm extends the option expiration date.
• E)the strike price is lowered.

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Definitions:

Quantity Theory

An economic theory that links the quantity of money in an economy to the level of prices of goods and services.

Money Supply

At a specific instant, the total monetary assets within an economy, including coins, cash, and the amounts present in checking and savings accounts.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the face value of interest payments.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on savings.