Suzanne Received 20 ISOs (Each Option Gives Her the Right

question 22

Essay

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working,when the stock price was $14 per share.Three years later,when the share price was $23 per share,she exercised all of her options.How much cash will Suzanne need on the exercise date of the stock options?

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Definitions:

Cross Elasticity of Demand

A measure of how the quantity demanded of one good changes in response to a price change in another good.

Substitutes

Goods or services that can replace each other in usage, offering alternative choices to consumers.

Complements

Goods or services that are used together, where the use of one increases the demand for the other.

Income Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in consumers' income, holding all other factors constant.