A company issued share option is an instrument that gives the holder the right, but not the obligation, to:
A) receive a certain dividend declared by the company by a specified date.
B) receive a bonus issue of shares in a proportion as notified by the company.
C) buy a certain number of shares in the company by a specified date at a stated price.
D) sell a certain number of shares in the company by a specified date at a stated price.

Question

Quizplus · Accepted Answer

A company issued share option gives the holder the right to buy a certain number of shares in the company by a specified date at a stated price. This is known as a call option. Option A is incorrect because share options do not necessarily involve dividends. Option B is incorrect because bonus issues of shares are distributed to existing shareholders and not to option holders. Option D is incorrect because selling shares is not a right granted by a share option.

A Company Issued Share Option Is an Instrument That Gives