Deeble Construction Co.'s stock is trading at $30 a share. There are also call options on the company's stock, some with an exercise price of $25 and some with an exercise price of $35. All options expire in 3 months. Which of the following best describes the value of these options?

a. The options with the $25 exercise price will sell for $5.

b. The options with the $35 exercise price have an exercise value greater than $0.

c. The options with the $25 exercise price have an exercise value greater than $5.

d. The options with the $25 exercise price will sell for less than the options with the $35 exercise price.

e. If Deeble's stock price rose by $5, the exercise value of the options with the $25 exercise price would also increase by $5

2.

Risk exposure can typically be reduced by one of several techniques. Which of the following does NOT reduce a firm's risk exposure to a particular event?

a. Transfer the risk to an insurance company

b. Reduce the probability of occurrence of an adverse event

c. Self-insure

d. Totally avoid the activity that gives rise to the risk

e. Purchase derivative contracts to reduce risk