Question

Van Winkle received stock options from his employer, RiP, Inc. The options entitled Van to purchase 100 shares of RiP common stock at an exercise price of $20 per share. The options vested when the market price of the stock was $32 per share. Van exercised his options on the vesting date. He sold the stock several months later for $38 per share. What is the total bargain element on Van's stock?

Answer 1

Total bargain element = $1,200

Step-by-step explanation:

Given:

Number of share = 100

Exercise price = $20 per share

Market price of the stock = $32 per share

Sale price per stock = $38

Total bargain element on Van's stock = ?

Computation of Total bargain element:

Total bargain element = (Market price of the stock - Exercise price)Number of share

Total bargain element = ($32 - $20)100

Total bargain element = ($12)100

Total bargain element = $1,200