Firms Occasionally Issue Stock Options in Order to

question 4

Multiple Choice

Firms occasionally issue stock options in order to

• A)compensate employees.
• B)compensate managers.
• C)motivate employees to take actions that will increase the market value of the firm's common shares.
• D)conserve cash.
• E)all of the above

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Definitions:

Capital Market Line

A line used in the capital asset pricing model to illustrate the rates of return for efficient portfolios depending on the risk-free rate of return and the level of risk (standard deviation) for a particular portfolio.

Forecasted Return

The predicted financial return of an investment over a specific period, often based on historical data, current trends, and professional analysis.

Required Return

The minimum return that an investor expects to achieve on an investment to consider it a worthwhile risk.

Standard Deviation

A measure of the dispersion or variability in a set of values, often used to gauge the risk associated with a particular investment or portfolio.