The Exercise Price and Market Price of Stock Under a Fixed

question 3

Multiple Choice

The exercise price and market price of stock under a fixed compensatory stock option plan are equal on the grant date.The fair value of the options is greater than the option price.Under the fair value method,

• A) compensation expense will be recognized in connection with the option plan.
• B) no compensation expense will be recognized in connection with the option plan.
• C) deferred compensation will be recognized.
• D) no paid-in capital from stock options will be recognized.

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Definitions:

Social-Comparison Explanation

A hypothesis positing that people assess their own value and societal position by comparing themselves to others.

Polarization in Groups

The process by which opinions within a group grow increasingly extreme, splitting the group into opposing sides.

Extreme Decisions

Decisions made under conditions of high uncertainty, risk, or stress, often with significant consequences.

Entrapment

A situation where individuals or groups feel unable to escape a threatening or harmful scenario, often exacerbating their commitment to a certain course of action.