Employee Stock Option Plan Class 4 MCQ Commerce

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About this Quiz

This Employee Stock Option Plan Class 4 MCQ test contains random 30 Objective Questions. You have select one correct answer among given options.

Employee Stock Option Plan Class 4 MCQ With Answers

1. What is an employee stock option?

  • An option to be paid in stock instead of cash
  • A right to buy company stock at a guaranteed discount for a fixed term
  • A call option on a company’s stock granted by the company to its employees
  • A grant of company stock as a salary bonus

2. How will you know for certain that your unexercised options will soon expire?

  • You are close to mandatory retirement age
  • Your company notifies you in writing
  • Your company's broker notifies you by email with the exercise forms
  • None of the above. It's your responsibility to check your grant agreement and understand the stock plan rules

3. Which of the following are true of employee stock options?

  • They are commonly valued as though they are regular American options
  • They are commonly valued as though they are regular American options.but with a reduced life
  • They are commonly valued as though they are regular European option
  • They are commonly valued as though they are regular European options but with a reduced life

4. Which of the following was true about employee stock options prior to 1995?

  • The options never had any affect on a company's financial statements
  • The value of options which were at-the-money when issued had to be expensed on the income statement
  • The value of options which were at-the-money when issued had to be reported in the notes to the financial statements
  • Options which were at-the-money when issued did not affect a company's financial statements

5. What is the difference between incentive stock options (ISOs) and non-qualified stock options (NSOs)?

  • ISOs have their own specific rules in the Internal Revenue Code
  • ISOs confer better tax treatment if the employee meets certain requirements
  • Exercising ISOs can subject the employee to the alternative minimum tax
  • All of the above

6. Which of the following is NOT usually true about employee stock options?

  • There is a vesting period
  • They can be sold to other employees
  • They are often at-the-money when issued
  • Their value is currently a charge to the income statement

7. How will you know for certain that your unexercised options will soon expire?

  • You are close to mandatory retirement age
  • Your company notifies you in writing
  • Your company's broker notifies you by email with the exercise forms
  • None of the above. It's your responsibility to check your grant agreement and understand the stock plan rules

8. Which of the following is NOT usually true about employee stock options?

  • There is a vesting period
  • They can be sold to other employees
  • They are often at-the-money when issued
  • Their value is currently a charge to the income statement

9. Which of the following are true of employee stock options?

  • They are commonly valued as though they are regular American options
  • They are commonly valued as though they are regular American options.but with a reduced life
  • They are commonly valued as though they are regular European option
  • They are commonly valued as though they are regular European options but with a reduced life

10. What term is used to describe losses shareholders experience because the interests of managers are not aligned with their own?

  • Agency costs
  • Backdating scandals
  • Dilution
  • Income statement expense

11. The exercise price of your vested options is $21.83 a share. The stock price is $23.18. Your options are:

  • Underwater
  • Underpriced
  • In the money
  • Worthless

12. The exercise price of your vested options is $21.83 a share. The stock price is $23.18. Your options are:

  • Underwater
  • Underpriced
  • In the money
  • Worthless

13. What is an employee stock option?

  • An option to be paid in stock instead of cash
  • A right to buy company stock at a guaranteed discount for a fixed term
  • A call option on a company’s stock granted by the company to its employees
  • A grant of company stock as a salary bonus

14. Which order of events is accurate for most stock options?

  • Vesting, grant, exercise
  • Grant, exercise, vesting
  • Vesting, exercise, sale
  • Exercise, vesting, sale

15. Which of the following can senior executives not use to exercise stock options?

  • Vested shares of restricted stock
  • A loan from the company
  • Shares of company stock bought on the open market
  • A personal check

16. Which of the following can senior executives not use to exercise stock options?

  • Vested shares of restricted stock
  • A loan from the company
  • Shares of company stock bought on the open market
  • A personal check

17. What is the difference between incentive stock options (ISOs) and non-qualified stock options (NSOs)?

  • ISOs have their own specific rules in the Internal Revenue Code
  • ISOs confer better tax treatment if the employee meets certain requirements
  • Exercising ISOs can subject the employee to the alternative minimum tax
  • All of the above

18. Which of the following was true about employee stock options prior to 1995?

  • The options never had any affect on a company's financial statements
  • The value of options which were at-the-money when issued had to be expensed on the income statement
  • The value of options which were at-the-money when issued had to be reported in the notes to the financial statements
  • Options which were at-the-money when issued did not affect a company's financial statements

19. Which order of events is accurate for most stock options?

  • Vesting, grant, exercise
  • Grant, exercise, vesting
  • Vesting, exercise, sale
  • Exercise, vesting, sale

20. What term is used to describe losses shareholders experience because the interests of managers are not aligned with their own?

  • Agency costs
  • Backdating scandals
  • Dilution
  • Income statement expense

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