Leverage Can ________ a Firm's Expected Earnings Per Share, but Does

question 62

Multiple Choice

Leverage can ________ a firm's expected earnings per share, but does not necessarily increase the share price.

• A) decrease
• B) dilute
• C) increase
• D) never change

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Definitions:

Stock Price

The cost or price of a single share of a company's stock, determined by the supply and demand in the market.

Black-Scholes

A mathematical model used for pricing European style options, taking into account the stock price, strike price, time to expiration, risk-free rate, and volatility.

Delta

In finance, it's a ratio that compares the change in the price of an asset, usually a marketable security, to the corresponding change in the price of its derivative.

Underlying Asset

The financial asset upon which a derivative's price, such as an option or future, is based.