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Hull: Fundamentals of Futures and Options Markets, Ninth Edition
Chapter 14: Employee Stock Options
Multiple Choice Test Bank
1. Which of the following is true?
A. An employee stock option is usually held to maturity
B. An employee stock option tends to be exercised earlier than an OTC option with the
same terms
C. An employee stock options tends to be exercised later than an OTC option with the
same terms
D. Employee stock options are usually exercised as early as possible
2. Which of the following is NOT usually true about employee stock options?
A. There is a vesting period
B. They can be sold to other employees
C. They are often at-the-money when issued
D. Their value is currently a charge to the income statement
3. What term is used to describe losses shareholders experience because the interests of managers
are not aligned with their own?
A. Agency costs
B. Backdating scandals
C. Dilution
D. Income statement expense
4. Which of the following are true of employee stock options?
A. They are commonly valued as though they are regular American options
B. They are commonly valued as though they are regular American options, but with a reduced
life.
C. They are commonly valued as though they are regular European option
D. They are commonly valued as though they are regular European options but with a reduced
life.
