An executive can legally earn a significant profit from stock options if Blank______.Multiple choice question.he or she commits to purchasing the maximum amount of shares allowedhe or she engages in insider tradingthe firm falls victim to a hostile takeoverthe firm performs well and the actual price per share exceeds the negotiated strike price
Question
An executive can legally earn a significant profit from stock options if Blank______.Multiple choice question.he or she commits to purchasing the maximum amount of shares allowedhe or she engages in insider tradingthe firm falls victim to a hostile takeoverthe firm performs well and the actual price per share exceeds the negotiated strike price
Solution
The correct answer is: "the firm performs well and the actual price per share exceeds the negotiated strike price".
Here's why: Stock options give an executive the right to buy a certain number of shares at a predetermined price, known as the strike price. If the actual price per share increases and exceeds the strike price, the executive can buy shares at the lower strike price and then sell them at the current higher price, making a profit. The other options mentioned either involve illegal activities (insider trading) or are not directly related to the profitability of stock options (committing to purchasing the maximum amount of shares allowed, the firm falling victim to a hostile takeover).
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