Test Bank: Chapter 14 Employee Stock Options Which of the following is true about employee stock options (ESOPS) and regular American exchange-traded call options (EXOPS) (Circle three) (a) ESOPS usually cannot be exercised at all times whereas EXOPS can (b) ESOPS cannot be traded (c) The exercise of EXOPS affects the number of shares outstanding (d) ESOPS can be exercised only at maturity whereas EXOPS can usually be exercised prior to maturity (e) Employees are usually liable to forfeit their ESOPS if they leave the company (f) Shareholders suffer dilution at the time ESOPS are exercised Which of the following are true of employee stock options (Circle three) (a) They are popular with start up companies (b) They currently have to be expensed on the income statement (c) It was not illegal to backdate stock option grants until recently (d) They usually reward executives in a bear market (e) Traditionally they have been at the money at the time of issuance (f) They are used by Microsoft today Which of the following are true of employee stock options (Circle three) (a) They are never exercised early if the company does not pay a dividend (b) They are commonly valued as though they are regular American options (c) They are commonly valued as though they are regular American options, but with a reduced life (d) They are commonly valued as though they are regular European options but with a reduced life (e) They are never worth more than regular American options with the same strike price and time to maturity (f) There was a period of time during which their value had to be reported, but was not included on the income statement Consider an employee stock option on a company that does not pay dividends When the most common valuation method is used what is likely to happen to the value calculated for the option when the vesting period is increased (Circle one) (a) The value stays the same (b) The value stays the same or increases (c) The value stays the same or decreases (d) The value can increase, stay the same, or decrease depending on the circumstances