Which of the Following Statements Is True Regarding Stock Options

question 30

Multiple Choice

Which of the following statements is true regarding stock options?

• A)When exercised, an incentive stock option has an option price exceeding the market price.
• B)When granted, a non-qualified stock option has an option price exceeding the market price.
• C)The fair value of an incentive stock option equals the current market price of the stock minus the present value of the exercise price discounted at the risk free interest rate over the number of years of life of the option.
• D)The value of an incentive stock option cannot be determined at the grant date,

---

Definitions:

Depreciates

Describes a decrease in value over time, often used in reference to currency or physical assets.

Imports

Goods and services purchased from other countries and brought into a country.

Inflation

The speed at which the overall price level for goods and services increases, thereby diminishing buying power.

Floating Exchange Rates

A system in which currency values are allowed to fluctuate according to foreign exchange market mechanisms without direct intervention by the country’s government.