General Securities Sales Supervisor (Series10) Practice Exam

What is the highest price a corporation can purchase its shares for Employee Stock Option Plan?

1. Any price that is reasonably related to the current market

2. $20.00

3. $20.10

4. $20.50

The correct answer is: $20.10

In the context of an Employee Stock Option Plan (ESOP), the purchase price of the corporation’s shares is critical because it determines how employees benefit from the options. The law or governing regulations often stipulate that the exercise price of stock options should not exceed the fair market value of the shares at the time the option is granted. Choosing a specific figure, such as $20.10, as the correct answer implies that this amount has been established based on a reasonable assessment of the stock's current market value. It suggests that this price is aligned with the corporation's obligations to provide a fair opportunity for employees to purchase stock in a manner that reflects current market conditions while still offering a potential benefit. The other listed prices lack clarity on whether they meet regulatory standards or how they relate to market value, which could make them unsuitable for inclusion as beneficial purchase options in an ESOP framework. Therefore, selecting $20.10 demonstrates an understanding that it reflects a legitimate market-related price point for the shares under the parameters of an ESOP.