Consider an Employee Stock Option on a Company That Does

question 1

Multiple Choice

Consider an employee stock option on a company that does not pay dividends. When the most common valuation method is used, what is likely to happen to the value calculated for the option when the vesting period is increased? choose one)

• A) The value stays the same
• B) The value stays the same or increases
• C) The value stays the same or decreases
• D) The value can increase, stay the same or decrease, depending on the circumstances

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Definitions:

Material Fact

A fact that is important to the subject matter of the contract.

Subject Matter

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Contract

An accord between several parties that carries legal weight and can be imposed by the law.

Voidable

A term referring to a contract or transaction that remains valid until one party decides to cancel or nullify it due to certain legal defenses.