How is the bargain element for a stock option calculated?
A)The difference between the strike price and the market price on the date of grant.
B)The difference between the market price on the exercise date and the market price on the date of grant.
C)The difference between the market price on the exercise date and the strike price.
D)The difference between the market price on the sale date and the strike pricE.The bargain element is simply the difference between the market price on the exercise date and the strike price.

Question

Quizplus · Accepted Answer

The bargain element is calculated as the difference between the market price on the exercise date and the strike price. Choice A is the market price on the date of grant, which is not relevant to the calculation. Choice B is the difference between the market price on the exercise date and the market price on the date of grant, which does not factor in the strike price. Choice D is the difference between the market price on the sale date and the strike price, which does not accurately reflect the bargain element for a stock option.

How Is the Bargain Element for a Stock Option Calculated