The Exercise Price and Number of Shares of an Option

question 41

Multiple Choice

The exercise price and number of shares of an option are unaffected by

• A) a reverse stock split.
• B) payment of a cash dividend.
• C) a 5 for 1 split.
• D) a stock dividend.

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Definitions:

Marking To Market

This refers to the daily adjustment of accounts to reflect profits and losses in the value of securities.

Option Contract

A financial contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.

Derivative Security

A financial instrument whose value is based on the value of another asset.

Economic Exposure

Long-term financial risk arising from permanent changes in prices or other economic fundamentals.