1. A[n] _______ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years during a period known as the ______ period which is not usually for more than _______.

call right, exercise, twelve months

option, redemption, twelve months

option, redemption, ten years

option, exercise, ten years

2. In order to take advantage of the business judgment rule, directors must have made an informed decision and have no conflict of the interest with the corporation.

True

False

3. The duty of ________ requires officers to exercise reasonable supervision over the business affairs of the corporation.

care

loyalty

obedience

ethics

4. Which of the following was the result at the U.S. Supreme Court level in SEC v. Edwards, the case in the text involving sales of interests in pay telephones and the issue of whether a moneymaking scheme falls outside the definition of an investment contract because the promised rate of return is fixed rather than variable?

That entitlement to a fixed rate of return did not prevent the arrangement from being an investment contract.

That entitlement to a fixed rate of return prevented the arrangement from being an investment contract.

That entitlement to a fixed rate of return did not prevent the arrangement from being an investment contract, but only because the underlying company went into bankruptcy.

That entitlement to a fixed rate of return prevented the arrangement from being an investment contract, but only because the underlying company went into bankruptcy.