Question

Rose Corporation has a stock purchase plan with the following provision. Each full-time employee with a minimum of one year's service may acquire from Rose Corporation, its common stock, $10 par, through payroll deductions at 5% below the market price on the date selected by the employee for a stock purchase (the exercise date). The exercise decision must be made within one year from the payroll deduction date. Employee Deeter signed a payroll deduction agreement form on January 1, 2020, for $70 per month. At that date, the market price of the stock was $27 per share. At the end of 2020, Deeter requested that stock be purchased equal to the amount Deeter accumulated as a deposit. At that date, the market price of the stock was $25 per share. How many whole shares was Deeter able to purchase under the plan? A. 30 shares B. 35 shares C.31 shares D. 29 shares

Answer 1

Answer:
Accumulated Deposite = $ 70 *12 = $840
Market price on Exercise date = $ 25
Exercise Price = $ 25 - ( 25*5%) = $ 23.75
Number of Shares = $ 840 / $ 23.75 = 35 shares
The Option "B" is correct