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?

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Definitions:

Compounded Monthly

Describes an interest calculation method where interest is added to the principal sum of a deposit or loan each month, leading to interest on interest.

Annuity

A financial instrument designed to distribute a steady series of disbursements to a person, commonly utilized as a source of income during retirement.

Amortize

To amortize is to gradually reduce or write off the cost or value of an intangible asset through systematic charges to income over its estimated useful life.

Compounded Monthly

A method of calculating interest where the interest earned or paid is added to the principal so that the next interest calculation includes prior interest.