Reference no: EM132024248

1) Which of the following is INCORRECT about the debt and equity of a firm in view of option theory?

Equity can be viewed as a call option on the firm's asset

Bondholders effectively own a call option on a firm's asset

Common debt and equity can be viewed as options, with the firm's assets as the underlying asset.

Option pricing model can be used to price risky debt

2) Which of the following statement(s) is/are true about employee stock option (ESOPS) and exchange-traded call options (EXOPS)?

I. ESOPS generally cannot be traded

II. The exercise of EXOPS and ESOPS both affect the number of shares outstanding

III. Employees are usually liable to forfeit their ESOPS if they leave the company

I and II only

I and III only

II and III only

All of above