When the vested life is shortened, the cost of share compensation goes down or up? There was some question along that line, I think I chose that one…
If the life is shortened, option price goes down so compensation expense goes down. That was my answer.
So it is expected life of the option, not about vesting…?
There is significant disagreement about that one. I was with you. Was the wording “Service Period” or “Expected Term of Option” … that makes the difference. If Service Period, you win…if Expected Term, we lose.
ya… i read it as expense going up…
I treated it like “time to expiration” for any option is shortened, so option value goes down… But I am not sure if the exact wording includes “vest”, but I remember that it includes “expected”… It is probably similar to the question 18 in EOC question of CFAI reading 23, where “expected life” is used.
valuecreator Wrote: ------------------------------------------------------- > If the life is shortened, option price goes down > so compensation expense goes down. That was my > answer. Sorry guys. I got confused. I now remember it was ‘vested period’ The expense should go up!
Aren’t the other two options eliminated (div yield, etc)?
Yes they were. RFR went up and Div Yield went down both of which make the expense go up so it was definitely the third option which I remember being time to expiry and not vesting time.
That was my thought process as well…
dito
jryan Wrote: ------------------------------------------------------- > Yes they were. RFR went up and Div Yield went down > both of which make the expense go up so it was > definitely the third option which I remember being > time to expiry and not vesting time. i remember time to expiry going down from 5.2. to 5. hence the option price goes down.