In Relating Stockholder Value in Terms of Put Options, the Stockholders

question 55

Multiple Choice

In relating stockholder value in terms of put options, the stockholders own the firm, they owe promised payments to the bondholders, and they have bought a put on the firm's assets with an exercise price equal to the promised payment to the bondholders. If the firm's cash flow is greater than these promised payments:

• A) the put is out-of-the-money, is not exercised, and the stockholders retain ownership.
• B) the put is out-of-the-money, is exercised, and the stockholders retain ownership.
• C) the put is in-the-money, is exercised, and the stockholders walk away from their promise to the bondholders.
• D) the put is in-the-money, is exercised, and the stockholders retain ownership.

---

Definitions:

Socialization

The process by which individuals learn and adopt the norms, values, behaviors, and social skills necessary to interact effectively within society or specific organizations.

Employee Relationship Management

Employee Relationship Management involves the strategies and processes used by an organization to effectively manage and nurture the interactions with its employees.

Acculturation

The process of cultural and psychological change that results following meeting between cultures, involving adaptations in cultural patterns of either or both groups.

Entrepreneurial Culture

A workplace environment that values creativity, innovation, and the willingness to take risks in order to achieve business success.