1. Which of the following statements is correct?
Paying executives with stock options instead of cash results in higher reported income
Paying executives with stock options instead of cash encourages them to maximize shareholder wealth
Paying executives with stock options instead of cash helps to retain good executives
All of the above are correct
2. We discussed Beta and expected return in relation to the market this week. Beta helps us determine the risk of an investment relative to the market. For this activity, explain your answer to what type of Beta would the following “investments” have, without doing the calculations? When explaining these investments, take into account non-financial “returns” other than profit such as:
A college education
A family vacation
A membership to a gym