Hazel Received 20 NQOs (Each Option Gives Her the Right

question 13

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. If Hazel holds the shares for two years and sells them when the market price is $25, how much gain will Hazel recognize on the sale and how much tax will she pay assuming her marginal tax rate is 37 percent?

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Definitions:

Lubb (S1)

The first heart sound in the cardiac cycle, associated with closure of the mitral and tricuspid valves at the beginning of ventricular contraction.

Dupp (S2)

A term referring to the duplication of the second heart sound, often associated with physiological or pathological cardiac conditions.

Pulmonary Trunk

The major blood vessel that carries deoxygenated blood from the right ventricle of the heart to the lungs for oxygenation.

Right Ventricle

The chamber of the heart that pumps deoxygenated blood to the lungs via the pulmonary artery.