Walter Works for a Large Firm That Produces Software and Has

question 50

Multiple Choice

Walter works for a large firm that produces software and has a capitalized value of $10 billion.This firm pays its employees,in part,with the company's stock,compensating Walter an additional thirty percent of his $50,000 annual salary worth of the company's stock.Which of the following is true?

• A)This compensation scheme reduces the level of risk in his portfolio since he is employed at the same company.
• B)This compensation scheme provides Walter a good means of minimizing financial risk since he can hold stock in his company rather than money in the bank.
• C)To reduce his exposure to risk Walter should purchase more stock in his company if he believes more people will buy computers in the future.
• D)To minimize risk Walter should sell the stock in his company and buy other assets to diversify his financial holdings.

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Definitions:

Promissory Note

A financial instrument indicating a written promise by one party to pay a definite sum of money to another party under agreed terms.

Notice

A formal communication or announcement given to someone to make them aware of something or to officially inform them of a decision or legal requirement.

Overdue

A status indicating that a payment, task, or obligation has not been fulfilled by the designated or expected deadline.

HDC Status

Holder in Due Course Status; a term in negotiable instruments law referring to a person who has acquired a negotiable instrument in good faith for value, and thus has certain protections.