When Employees Are Granted Options as Part of a Compensatory

question 22

Multiple Choice

When employees are granted options as part of a compensatory stock option plan,

• A) Total compensation is measured using a fair value method.
• B) Total compensation is measured using the intrinsic method.
• C) Total compensation is measured when the options are in the money.
• D) Total compensation is measured using the difference between the strike price and the fair value of the options on the grant date.

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that suppliers are willing to offer for sale, holding all else constant.

Highly Inelastic

Describes a situation where demand or supply shows little to no response to changes in price, often due to the lack of close substitutes.

Highly Elastic

Describes a market situation where demand or supply of a good or service is very sensitive to changes in price.

Excise Tax

A tax imposed on the sale of specific goods and services, such as fuel, tobacco, and alcohol.