Suzanne Received 20 ISOs (Each Option Gives Her the Right

question 170

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 $13 per share.Three years later, when the share price was $23 per share, she exercised all of her options.If Suzanne holds the shares for two additional years and sells them when the market price is $30, how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent?

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Definitions:

Regression Line

A line that best fits the data points on a scatter plot, showing the relationship between the independent and dependent variables.

Regression Analysis

A statistical method for investigating and modeling the relationship between variables, often between one dependent and one or more independent variables.

Dependent Variable

A variable in scientific research or statistical analysis that changes in response to the variation of an independent variable.