n NISM Certifications
VII NISM Series VII
Medium

In case of Bonus shares, the new option strike price is arrived at by _________ the old strike price by the adjustment factor.

Practice question from NISM Series VII Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Adding

  2. B

    Subtracting

  3. C

    Multiplying

  4. Dividing

    Correct answer

Why this is the answer

When a Bonus issue, Stock Split, or Consolidation occurs, the strike price of option contracts is adjusted by dividing the old strike price by the adjustment factor to maintain price equilibrium.

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