Hazel Received 20 NQOs (Each Option Gives Her the Right

question 85

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 cash will Hazel need on the exercise date to exercise the stock option?

---

Definitions:

Nominal Rate

The interest rate or rate of return quoted on a loan or investment, not adjusted for inflation.

Compounding Intervals

The frequency with which interest is added to the principal balance of an investment, affecting the total interest earned over time.

Annuity Due

A type of annuity where payments are made at the beginning of each period, as opposed to the end, which is more common in regular annuities.

Present Value

The equivalent current value of a future financial sum or stream of cash flows, factoring in a specified rate of return.