Accounting for Stock Options

Which order of events is accurate for most stock options?

• Vesting -> grant

  -> exercise

• Grant -> exercise

  -> vesting

• Vesting -> Exercise -> Sale

• Exercise -> Vesting -> Sale

How long is the term of most stock option grants?

• As long as you are employed at the

  company

• Until vesting

• 10 years, regardless of whether your

  employment ends

• 10 years, unless employment ends sooner

The exercise price of your vested options is $21.83 a share. The stock price is $23.18. Your options are:

• Underwater

• Underpriced

• In-the-money

• Worthless

How will you know for certain your unexercised options will expire?

• Close to mandatory retirement age

• Notified by company in writng

• Notified by company broker by email

• None of the above: it's your own

  responsibility

How does a privately held company decide on a strike price?

• The board of directors vote

• The employee decides

• An outside appraiser decides

• The CEO decides

Which of the following is NOT usually true about employee stock options?

• There is a vesting period

• They can be sold to other employees

• They are often at-the-money when issued

• Their value is currently a charge to the

  income statement