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Which of the following statements about stock options is true?Multiple choice question.Companies save money by offering stock options, but employees always lose money with stock options.The recipient is given the right to purchase stock at a predetermined price sometime in the future.The recipient has the right to set the price of the stock.If the recipient agrees to stock options as part of a compensation package, the recipient is obligated to buy stock in the future.

Question

Which of the following statements about stock options is true?Multiple choice question.Companies save money by offering stock options, but employees always lose money with stock options.The recipient is given the right to purchase stock at a predetermined price sometime in the future.The recipient has the right to set the price of the stock.If the recipient agrees to stock options as part of a compensation package, the recipient is obligated to buy stock in the future.

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Solution

The correct statement about stock options is: "The recipient is given the right to purchase stock at a predetermined price sometime in the future."

Here's why:

  1. "Companies save money by offering stock options, but employees always lose money with stock options." - This is not always true. Employees can potentially gain money if the company's stock price increases over time.

  2. "The recipient is given the right to purchase stock at a predetermined price sometime in the future." - This is the basic definition of a stock option. The employee has the option, but not the obligation, to buy the company's stock at a certain price (the "strike price") within a certain time period.

  3. "The recipient has the right to set the price of the stock." - This is not true. The price of the stock (the "strike price") is set by the company at the time the stock options are granted.

  4. "If the recipient agrees to stock options as part of a compensation package, the recipient is obligated to buy stock in the future." - This is not true. The recipient has the option to buy stock, but is not obligated to do so.

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With ______, certain employees are given the right to buy stock at a future date for a discounted price.Multiple choice question.profit sharingbonusesgainsharingstock options

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