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. For in-depth courses of study that offer CE credits, see the myStockOptions Learning Center.

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 will you have to exercise vested 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. When are NQSOs taxed?

Never: they are exempt from tax when held for more than three years At exercise At grant At sale

8. What is the holding period requirement for obtaining the favorable tax treatment available to incentive stock options?

One year from the date of grant One year from the date of exercise One year from the date of grant and one year from the date of exercise Two years from the date of grant and one year from the date of exercise

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 exam? Email editors@mystockoptions.com

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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.

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