By Rewarding Executives with Large Option Positions, Corporations

question 30

Multiple Choice

By rewarding executives with large option positions, corporations:

• A)cause the executives to hold highly undiversified portfolios.
• B)put the firm in a risky position to pay off the options.
• C)cause the value of the stock to fall because the options are theft.
• D)are really valueless because most options are never exercised.
• E)None of the above.

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Definitions:

Punishment

A consequence imposed for breaking a rule or law, intended to discourage the behavior.

Operant Responding

A technique of teaching that involves giving rewards for good behavior and punishments for bad behavior.

Negative Punishment

Removing a desirable stimulus to decrease the likelihood of a behavior being repeated.

Positive Punishment

In operant conditioning, a method that involves adding an unfavorable outcome or event following an undesired behavior, intended to decrease the likelihood of the behavior recurring.