Question

Regarding the employee stock option right to buy program discussed in class, what is the correct answer in the following example. An employee receives 100 shares of stock at $20. A year later the employee gets another 100 shares at $35 and a year later they receive another100 shares at $35. At some point after that the employee decides to sell all the shares at a $50 price when the stock rises to $50. How much will they personally profit?

A. $9000

B. $6000

C. $7000

D. None of the above

Answer 1

The correct answer is option (B) i.e. $6,000 which is calculated as below:-
	No. of shares	Share price	Amount ($)
	100 Shares received (100*20)	20	2,000
	100 shares purchased (100*35)	35	3,500
	100 shares purchased (100*35)	35	3,500
Total shares in hand	300 shares	90	9,000
	Less : all shares sold (300*50)	90	(15,000)
	Profit to employee		6,000