Question

Ronald sees that his employer's stock has grown from $20 a share to $60 a share this year, while most stocks have seen only 5% growth. His employer offers to let him convert a large portion of his salary into stock options. What is NOT a valid reason to turn down the stock offer? Select the best answer from the choices provided.
A. Stocks with high returns have high volatility, and Ronald's company may not grow further.

B. Ronald may be taxed more for capital gains than he would be for employment income.

C. Stock options are illiquid, and Ronald may not be able to use them to pay for unexpected bills.

D. Ronald would be committing stock fraud if he exercises the options.

Answer 1

D. Ronald would be committing stock fraud if he exercises the options.

Explanation:

The first three options are valid reasons to turn down the offer of stocks in place of salary.

A. Stocks with high returns have high volatility, and Ronald's company may not grow further.

B. Ronald may be taxed more for capital gains than he would be for employment income.

C. Stock options are illiquid, and Ronald may not be able to use them to pay for unexpected bills.

Option D is NOT a valid reason to turn down the stock offer. So, the answer is:

D. Ronald would be committing stock fraud if he exercises the options.