Quiz Ch 23 – T/F Call Option Value and Underlying Stock Worth
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: A call option holds no value if the underlying stock is without worth.
True or false: A call option holds no value if the underlying stock is without worth.
True or false: A call option will be without value at expiration if the stock price is below the exercise price.
True or false: The minimum value of a call option is determined by the greater of zero or the difference between the exercise price and the stock price.
True or false: When comparing values, a callable bond is anticipated to be lower than a straight bond with the same coupon rate and maturity.
True or false: Callable bonds offer issuers a valuable option in the face of fluctuating interest rates.
True or false: The floor of a convertible bond is defined as the value of the underlying bond.
True or false: When comparing the value, a convertible bond is consistently lower than a straight bond with equivalent coupon and maturity.
True or false: With convertible bonds, investors have the option to exchange them for the firm’s stock.
True or false: FASB mandates deducting the fair value of option grants, calculated using an option valuation model, in profit calculations.
True or false: Option holders gain an advantage from the volatility of stock prices.