Regarding the employee stock option right to buy program discussed in class, what is the correct...

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

Expert Solution

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

ekkarill92 answered 2 years ago

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