When Using the Preferred Approach to Account for a Compensatory

question 110

Multiple Choice

When using the preferred approach to account for a compensatory stock option plan, the total compensation cost is the

• A)fair value per option times the number of options issued
• B)fair value per option times the number of options that actually become vested
• C)fair value per option times an estimate, at the grant date, of the number of options expected to be deferred
• D)fair value per option times the number of options expired

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Definitions:

Forward Exchange Rate

The agreed-upon exchange rate for currencies to be swapped on a specified future date.

Spot Rate

The current market price at which a particular asset, such as currency or commodity, can be bought or sold for immediate delivery.

Discount

A reduction applied to the regular price of goods or services or the amount by which the present value of future cash flows is reduced for discounting purposes.

Foreign Currency

Currency used in a country other than one’s own, representing a medium of exchange for goods and services in that foreign country.