Question 36. An executive is given two choices, either receive nontransferable one-year European call options...
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Question 36. An executive is given two choices, either receive nontransferable one-year European call options on 1000 shares with an exercise price of 100 or get an extra $1000 in bonus at the end of the year for every point (dollar) that the companys stock exceeds 100 dollars. Which bonus should she choose to provide her with the largest dollar payout? (Ignore transaction costs).
A. Take the options, since the optionality has value
B. Take the money, since cash is the king
C. It does not matter
D. it matters because you need to consider the time value of money, but not enough information is provided to answer the question
E. It matters because you need to consider volatility of the returns, but not enough information is provided to answer the question
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