Stock Options Quiz

Test Your Knowledge: Stock Options Quiz Test your basic knowledge of stock options. Please answer the following 10 questions. This quiz is also a course of study. The answer key links to content on the topic for follow-up reading.
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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 right to buy company stock at a specified price for a fixed term
		A grant of company stock as a salary bonus



2.	Which order of events is accurate for most stock options?
		Vesting, grant, exercise
		Grant, exercise, vesting
		Vesting, exercise, sale
		Exercise, vesting, sale



3.	How long is the term of most stock option grants?
		As long as you are employed at the company
		Until vesting
		10 years, regardless of whether your employment ends
		10 years, unless your employment ends sooner



4.	After you leave a company, what can happen to unvested stock options, and how long might you have to exercise stock options before expiration?
		Depends on the reason for leaving the company
		All unvested options are forfeited; you have no time to exercise them, as they expire when you leave the company
		Vesting continues, and you have until the end of the option term to exercise
		Any of the above. You need to check your stock plan and grant agreement for the treatment of unvested stock options and the post-termination exercise period



5.	Which can you not use to exercise stock options?
		Shares from a 401(k)
		Vested shares of restricted stock
		A stock swap with company stock you already own
		Cash



6.	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



7.	What does ISO stand for?
		Indexed stock option
		Institutional stock option
		In-the-money stock option
		Incentive stock option



8.	When are NQSOs taxed?
		Never: they are exempt from tax when held for more than three years
		At exercise
		At grant
		At sale



9.	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



10.	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



Comments on this quiz? Email editors@mystockoptions.com Customize This Quiz For Your Company. All of our quizzes are also available through our custom stock plan sites and as part of our content licensing to companies. We can even customize our quizzes to fit your stock plans. This makes the quizzes a useful tool for education and communications when you award new grants, switch from options to restricted stock, or near a major vesting date. For details of our corporate services and licensing, email sales@mystockoptions.com.