Hazel Received 20 NQOs (Each Option Gives Her the Right

question 32

Essay

Hazel received 20 NQOs (each option gives her the right to purchase 10 shares of stock for $7 per share)at the time she started working, when the stock price was $14 per share. Now that the share price is $20 per share, she intends to exercise all of her options. How much income will Hazel recognize on the exercise date and how much tax will she pay, assuming her marginal tax rate is 24 percent?

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Definitions:

Coupon Rates

Coupon Rates are the annual interest rates paid by bond issuers on the bond's face value, distributed typically in semi-annual payments.

Floating-Rate Bonds

Bonds with interest rates that adjust periodically based on a reference interest rate or index, protecting investors from interest rate risk.

Market Price

The price at which a product or service is traded in the competitive marketplace.

Put Provision

A clause found in certain securities that allows the holder to force the issuer to repurchase the security at specified prices before maturity.