Question 1

Employee benefit plans that do not relate to pensions are exempted from ERISA rules on reporting,disclosure,and fiduciary responsibility.

Accepted Answer

A) True 
 B)False  False

Question 2

When a nonqualified stock option is involved,the spread is taxable to the optionee as ordinary income whether or not the optionee actually sells the shares.

Accepted Answer

A) True 
 B)False  True

Question 3

To receive favorable tax treatment when buying shares in an employee stock purchase plan,an employee can own no more than ____ of the voting power of the employer or ____ of the value of all shares of stock of the employer.

Accepted Answer

A) 5%,5% 
B) 5%,10% 
C) 3%,8% 
D) 9%,4% 
A) 5%,5% 
B) 5%,10% 
C) 3%,8% 
D) 9%,4% A

Question 4

Which of the following is true regarding executive compensation in the U.S.?

Accepted Answer

A) There is no public consensus in the U.S.as to the correct amount of compensation that should be paid to an executive of a publicly traded company. 
B) The Sarbanes-Oxley Act limits the amount of compensation that may be paid to executives of publicly traded companies. 
C) Most states limit the amount of compensation that may be paid to executives of publicly traded companies. 
D) The Sarbanes-Oxley Act limits the amount of compensation that may be paid to executives of publicly traded companies and also most states impose such limits. 
A) There is no public consensus in the U.S.as to the correct amount of compensation that should be paid to an executive of a publicly traded company. 
B) The Sarbanes-Oxley Act limits the amount of compensation that may be paid to executives of publicly traded companies. 
C) Most states limit the amount of compensation that may be paid to executives of publicly traded companies. 
D) The Sarbanes-Oxley Act limits the amount of compensation that may be paid to executives of publicly traded companies and also most states impose such limits.

Question 5

What are the principal federal act(s)regulating securities transactions and issuers?

Accepted Answer

A) The Transactions Act of 1999. 
B) The Stock Issuance Act of 1934. 
C) Both the Transactions Act of 1999 and the Stock Issuance Act of 1934. 
D) Neither the Transactions Act of 1999 nor the Stock Issuance Act of 1934. 
A) The Transactions Act of 1999. 
B) The Stock Issuance Act of 1934. 
C) Both the Transactions Act of 1999 and the Stock Issuance Act of 1934. 
D) Neither the Transactions Act of 1999 nor the Stock Issuance Act of 1934.

Question 6

The option exercise price in an employee stock purchase plan must be uniform for all eligible employees.

Accepted Answer

A) True 
 B)False

Question 7

Shareholder proposals regarding executive compensation are disallowed by the Securities and Exchange Commission.

Accepted Answer

A) True 
 B)False

Question 8

All state laws affecting in any way a plan coming under ERISA are preempted.

Accepted Answer

A) True 
 B)False

Question 9

A ________ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years.

Accepted Answer

A) stock option 
B) stock release 
C) securities release 
D) security allowance 
A) stock option 
B) stock release 
C) securities release 
D) security allowance

Question 10

Federal law prohibits employers from allowing payroll deductions as a way for employees to purchase stock under an employee stock purchase plan.

Accepted Answer

A) True 
 B)False

Question 11

Stock options are an approved and well established mechanism for existing owners to sell shares.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following in true regarding standard(s)set by the Sarbanes-Oxley Act pertaining to compensation committees?

Accepted Answer

A) The Act requires that the compensation committee be made up entirely of outside directors. 
B) The Act requires that no more than 10% of the compensation committee be made up of inside directors. 
C) The Act requires that shareholders directly elect the compensation committee. 
D) The Act does not address the makeup of the compensation committee. 
A) The Act requires that the compensation committee be made up entirely of outside directors. 
B) The Act requires that no more than 10% of the compensation committee be made up of inside directors. 
C) The Act requires that shareholders directly elect the compensation committee. 
D) The Act does not address the makeup of the compensation committee.

Question 13

By federal law,a stock option must carry a guarantee that the optionee will not lose any money and can always redeem the stock at the price at which it was purchased.

Accepted Answer

A) True 
 B)False

Question 14

Incentive stock options are frequently used by publicly held companies whereas nonqualified stock options are more typically used by privately held companies.

Accepted Answer

A) True 
 B)False

Question 15

The exercise of a(n)________ stock option generally entitles a company get to take a deduction from its earnings without further considerations.

Accepted Answer

A) nonqualified 
B) incentive 
C) both nonqualified and incentive 
D) neither nonqualified nor incentive 
A) nonqualified 
B) incentive 
C) both nonqualified and incentive 
D) neither nonqualified nor incentive

Question 16

For growth-oriented smaller companies,stock options are an ineffective way to preserve cash.

Accepted Answer

A) True 
 B)False

Question 17

A(n)________ gives an employer the right to recoup some or all of an employee's stock option gain if he or she goes to work for a competitor within a certain period of time following exercise of the option.

Accepted Answer

A) penalty provision 
B) forfeiture provision 
C) clawback provision 
D) snake provision 
A) penalty provision 
B) forfeiture provision 
C) clawback provision 
D) snake provision

Question 18

Whether a public company may make loans to directors is strictly a matter of state law.

Accepted Answer

A) True 
 B)False

Question 19

Employers usually use employee stock purchase plan options as a way for rank-and-file employees to share in the growth of the company by purchasing stock.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following involves a promise to pay a bonus in the future in the form of a share of the company's stock?

Accepted Answer

A) A restricted stock unit 
B) An allocated stock obligation 
C) An approved stock unit 
D) A floating stock promise 
A) A restricted stock unit 
B) An allocated stock obligation 
C) An approved stock unit 
D) A floating stock promise

Exam 14: executive compensation and employee benefits

Employee benefit plans that do not relate to pensions are exempted from ERISA rules on reporting,disclosure,and fiduciary responsibility.

When a nonqualified stock option is involved,the spread is taxable to the optionee as ordinary income whether or not the optionee actually sells the shares.

To receive favorable tax treatment when buying shares in an employee stock purchase plan,an employee can own no more than ____ of the voting power of the employer or ____ of the value of all shares of stock of the employer.

Which of the following is true regarding executive compensation in the U.S.?

What are the principal federal act(s)regulating securities transactions and issuers?

The option exercise price in an employee stock purchase plan must be uniform for all eligible employees.

Shareholder proposals regarding executive compensation are disallowed by the Securities and Exchange Commission.

All state laws affecting in any way a plan coming under ERISA are preempted.

A ________ gives the person to whom it is granted the right to buy a certain number of shares at a fixed price for a fixed number of years.

Federal law prohibits employers from allowing payroll deductions as a way for employees to purchase stock under an employee stock purchase plan.

Stock options are an approved and well established mechanism for existing owners to sell shares.

Which of the following in true regarding standard(s)set by the Sarbanes-Oxley Act pertaining to compensation committees?

By federal law,a stock option must carry a guarantee that the optionee will not lose any money and can always redeem the stock at the price at which it was purchased.

Incentive stock options are frequently used by publicly held companies whereas nonqualified stock options are more typically used by privately held companies.

The exercise of a(n)________ stock option generally entitles a company get to take a deduction from its earnings without further considerations.

For growth-oriented smaller companies,stock options are an ineffective way to preserve cash.

A(n)________ gives an employer the right to recoup some or all of an employee's stock option gain if he or she goes to work for a competitor within a certain period of time following exercise of the option.

Whether a public company may make loans to directors is strictly a matter of state law.

Employers usually use employee stock purchase plan options as a way for rank-and-file employees to share in the growth of the company by purchasing stock.

Which of the following involves a promise to pay a bonus in the future in the form of a share of the company's stock?

law, value creation, and risk management

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Agency

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sales, licensing, and e-commerce

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product liability

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civil rights and employment discrimination

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Filters

To receive favorable tax treatment when buying shares in an employee stock purchase plan,an employee can own no more than of the voting power of the employer or of the value of all shares of stock of the employer.