Regarding Employee Stock Options, Which of the Following Is/are True

question 41

Multiple Choice

Regarding employee stock options, which of the following is/are true?

• A)Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate.
• B)Total compensation cost is the number of options the firm expects to vest times the expected value per option at the date of redemption.
• C)Firms amortize this total cost over the requisite service period, which is the expected period of benefit.
• D)The requisite service period is usually the period between the grant date and the vesting date.
• E)Firms do not typically remeasure most types of stock options after the initial grant date.

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Definitions:

Schedule

A plan for carrying out a process or procedure, listing the times at which specific events are intended to occur.

Articulating

The act of clearly expressing an idea, thought, or feeling through speech or writing.

Slack

The amount of leeway or extra capacity available within a system, which can accommodate delays or unforeseen issues without impacting the outcome.

Anticipating Contingencies

The process of preparing for potential future events or situations, especially unexpected ones, in planning or decision-making.