Question

exercises 10 stock options awarded several years ago. the following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. how much will it cost mace to purchase the options on the exercise date?

Answer 1

The cost to purchase the shares upon exercising the 10 stock options is $1,000, determined by multiplying the number of options by the number of shares per option and the strike price.

Step-by-step explanation:

The student exercises 10 stock options, where each option allows the purchase of 10 shares, at a strike price of $10, while the market price at the time of exercising is $15.

To calculate the cost to purchase the shares upon exercising the options, you need to multiply the number of options by the number of shares per option and the strike price.

In this case, the student exercises 10 options, each for 10 shares, at a strike price of $10, resulting in a total cost of 10 options x 10 shares/option x $10/share = $1,000.