In 2014,a company employee received an option to purchase the company's stock at $45 per share.If the stock is trading at $40 a share in 2016,the employee will most likely:
A) exercise the option, receiving a gain of $5.
B) exercise the option, receiving a gain of $40.
C) not bother to exercise the options.
D) buy the stock at $45 per share.
E) sell the shares to a third party slightly above the market price.

Question

Quizplus · Accepted Answer

If the stock price falls below the options level, employees are not likely to exercise the options.

In 2014,a Company Employee Received an Option to Purchase the Company's