Because most growth options are likely to be ________,the growth component of firm value is likely to be ________ than the ongoing assets of the firm.
A) out-of-the-money; riskier
B) in-the-money; riskier
C) out-of-the-money; more certain
D) in-the-money; more certain

Question

Quizplus · Accepted Answer

Growth options are typically riskier than ongoing assets because they are uncertain and dependent on future events. Out-of-the-money options, which are farther from being realized, are even riskier than in-the-money options. Therefore, the growth component of firm value is likely to be riskier than the ongoing assets of the firm.

Because Most Growth Options Are Likely to Be ________,The Growth