Which of the Following Statements Is FALSE

question 55

Multiple Choice

Which of the following statements is FALSE?

• A)The option price is more sensitive to changes in volatility for at-the-money options than it is for in-the-money options.
• B)A share of stock can be thought of as a put option on the assets of the firm with a strike price equal to the value of debt outstanding.
• C)In the context of corporate finance,equity is at-the-money when a firm is close to bankruptcy.
• D)Because the price of equity is increasing with the volatility of the firm's assets,equity holders benefit from a zero-NPV project that increases the volatility of the firm's assets.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials purchased and the expected (or standard) cost, multiplied by the quantity of materials purchased.

Standard Quantity

The expected amount of materials or inputs required to produce a single unit of product under normal conditions.

Actual Materials Purchased

The total quantity and cost of raw materials bought by a company for production during a specific period.

Standard Price

A predetermined cost assigned to materials, labor, and overhead for budgeting and cost-control purposes.