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 1 year ago

3. A six-month call option is the right to buy stock at $30. Currently, the stock...

3. A six-month call option is the right to buy stock at $30. Currently, the stock is selling for $32 and the call is selling for $3. You are considering buying 100 shares of the stock ($3,000) or one call option ($300). a) If the price of the stock rises to $39 within six months, what would be the profits or losses on each position? What would be the percentage gains or losses? b) If the price of the stock...

Which is correct regarding call option elasticity? It measures percentage change in the option price per...

Which is correct regarding call option elasticity? It measures percentage change in the option price per 1% change int he stock price It is positive It is higher than one All of the above

11. Complete the following: A put option gives you _____________? a. The right to buy an...

11. Complete the following: A put option gives you _____________? a. The right to buy an asset at a specified price b. The right to sell an asset at a specified price c. The right to buy an asset at the market price d. The right to sell an asset at the market price 12. Which of the following methods should be used when faced with capital rationing? a. payback period b. internal rate of return c. profitability index d. ...

You buy a European call option for a stock. The premium paud for this put option...

You buy a European call option for a stock. The premium paud for this put option is $15. The pricd is $200. You are now at the maturity of this option. (a) If the price at maturity is $210, what is the optimal decision? Calculate and explain possible choices. (b) What are the profits/losses for the seller of this option? Explain. (c) What is the breakeven point? Explain.

19. What is a call option? A. Right to sell stock at a pre-determined price B....

19. What is a call option? A. Right to sell stock at a pre-determined price B. Right to buy stock at a post-determined price C. Right to sell stock at a post-determined price D. Right to buy stock at a pre-determined price 20. When is a call option exercised for maximum gain? A. Buyers exercise when the option is in the money B. Buyers exercise when the option is out of the money C. Sellers exercise when the option is...

QUESTION 20 An option is a contract which gives its holder the right to buy or...

QUESTION 20 An option is a contract which gives its holder the right to buy or sell an asset at a predetermined price within a specified period of time. True False QUESTION 21 The exercise price is the price that must be paid for a share of common stock when it is bought by exercising a warrant. True False QUESTION 22 Albany Motors recently completed a 3-for-1 stock split. Prior to the split, the company had 10 million shares outstanding...

Which of the following are correct general statements about confidence intervals, as discussed in this class?...

Which of the following are correct general statements about confidence intervals, as discussed in this class? (Select all that apply. To be marked correct: All of the correct selections must be made, with no incorrect selections.) In general: The higher the confidence level, the wider the associated confidence interval. In general: A point-estimate has a positive percentage level of confidence associated with it. In general, for a given confidence interval: Confidence levels and probability values are different ideas. In general,...

You buy a stock at $200 and buy an at-the-money 8-month European put option on the...

You buy a stock at $200 and buy an at-the-money 8-month European put option on the stock at a price of $15. The continuously compounded risk-free interest rate is 4%. Calculate the 8-month profit if the 8-month stock price is $180.

1. What are employer' rights regarding employee lifestyle choices? 2. What are the employee' rights regarding lifestyle choices?...

1. What are employer' rights regarding employee lifestyle choices? 2. What are the employee' rights regarding lifestyle choices? Based in this article Finding employment is becoming increasingly dificult for smokers. Twenty-nine U.S. states have passed legislation prohibiting employers from refusing to hire job ause they smoke, but 21 states have no such restrictions. Many ealth care organizations, such as the Cleveland Clinic and Baylor Health Care System, and some large non-health care employers, including Scotts Miracle-Gro, Union Pacific Railroad, and Alaska Airlines,...

16)Employee stock ownership programs, employee stock purchase program and profit sharing are all examples of group...

16)Employee stock ownership programs, employee stock purchase program and profit sharing are all examples of group incentives. What is the most likely reason that firms are implementing group incentive plans? a) Rising cost of health benefits b) Expected loss of older workers c) Heavy reliance on teams to manage work d) None of the above ) Which of the following statements about health insurance and Cobra is true? a) Cobra requires employers to permit employees to extend health insurance...

Question