The intrinsic value of a share option is fair value of shares less subscription price fair value of option less subscription price subscription price less fair value of shares subscription price less fair value of option
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- The intrinsic value of a share option is a. subscription price less fair value of option b. fair value of option less subscription price c. fair value of shares less subscription price d. subscription price less fair value of sharesStock purchased through a rights offering may carry lower margin requirements. True or False True FalseWhat are the disadvatages of selling call options LEAP ,which allows the seller to sell shares at a higher strike price?
- To the extent that shares sold during an IPO are discounted from their appropriate price, the proceeds that the issuing firm receives from the IPO are lower than it deserves. Question 21 options: True FalseOption Risk True or false: The unsystematic risk of a share of stock is irrelevant for valuingthe stock because it can be diversified away; therefore, it is also irrelevant for valuing a call optionon the stock. ExplainWhich of the following statement about a rights issue is correct? a. The share price can be expected to increase on the ex-rights date b. On the ex-rights date the rights separate from the share c. The subscription price is usually greater than the market price d. A rights issue is offered to an investor whether they are an existing shareholder or not e. If you buy shares cum-rights you are not entitled to participate in the rights issue
- Which of the following statement(s) is(are) TRUE? (i) The valuation price of a stock primarily depends on expected future dividends to its shareholders and its required rate of return. (ii) An investor who intends to sell a stock after holding it for a short period will forgo all future dividends, thus will be willing to pay for a lower price for the stock compared to another investor who prefers to hold the share for a longer period. (iii) The valuation share price is positively related to the share's required rate of return.what is the firm’s cost of preferred stock and cost of a new issue of common stock? Which of the two sources offers a lower cost?Preference shares: Have voting rights Have specific maturity dates Pay a specific return to investors Offer investors the same level of risk than ordinary shares
- Select all that are true with respect to option valuation: Group of answer choices The holder of a call option has rights to the dividend on the underlying stock. The holder of a put option has rights to the dividend on the underlying stock. A call option on a dividend paying stock would be worth less than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend). A call option on a dividend paying stock would be worth more than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend).Why is the cost of retained earnings cheaper than the cost of issuing new common stock? Group of answer choices Issuing new common stock may send a negative signal to the capital markets, which may depress the stock price. When a company issues new common stock they also have to pay flotation costs to the underwriter. Either NeitherA rights offering that gives existing target shareholders the right to buy shares in either the target or the acquirer at a deeply discounted price once certain conditions are met is called a: A. Golden parachute B. Poison pill C. White knight D. Classified board