Charles Schwab 2015 Annual Report Download - page 111

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 91 -
The Company’s stock option activity is summarized below:

Weighted-

Weighted- Average

Average Remaining Aggregate
Number Exercise Price Contractual
Intrinsic
of Options per Share Life (in years) Value
Outstanding at December 31, 2014 41 $ 17.74 
Granted 6 31.04  
Exercised (6) 15.78 
Forfeited (1) 21.06  
Expired - 16.16 
Outstanding at December 31, 2015 40 $ 19.82 6.62 $ 528
Vested and expected to vest at December 31, 2015 39 $ 19.61 6.55 $ 519
Vested and exercisable at December 31, 2015 26 $ 16.46 5.51 $ 425
The aggregate intrinsic value in the table above represents the difference between CSC’s closing stock price and the exercise
price of each in-the-money option on the last trading day of the period presented.
Information on stock options granted and exercised is presented below:
Year Ended December 31, 2015 2014 2013
Weighted-average fair value of options granted per share $ 8.56 $ 7.82 $ 6.33
Cash received from options exercised 90 189 258
Tax benefit realized on options exercised 22 8 -
Aggregate intrinsic value of options exercised 90 86 82
Management uses a binomial option pricing model to estimate the fair value of options granted. The binomial model takes
into account the contractual term of the stock option, expected volatility, dividend yield, and risk-free interest rate. Expected
volatility is based on the implied volatility of publicly-traded options on CSC’s stock. Dividend yield is based on the average
historical CSC dividend yield. The risk-free interest rate is based on the yield of a U.S. Treasury zero-coupon issue with a
remaining term similar to the contractual term of the option. Management uses historical option exercise data, which includes
employee termination data to estimate the probability of future option exercises. Management uses the Black-Scholes model
to solve for the expected life of options valued with the binomial model presented below. The assumptions used to value the
Company’s options granted during the years presented and their expected lives were as follows:
Year Ended December 31, 2015 2014 2013
Weighted-average expected dividend yield 1.22 % 1.20 % 1.13 %
Weighted-average expected volatility 28 % 28 % 28 %
Weighted-average risk-free interest rate 2.2 % 2.4 % 2.5 %
Expected life (in years) 4.7 – 7.5 4.4 – 7.2 4.6 – 7.9
Restricted Stock Units
Restricted stock units are awards that entitle the holder to receive shares of CSC’s common stock following a vesting period.
Restricted stock units are restricted from transfer or sale and generally vest annually over a three- to five-year period, while
some vest based upon the Company achieving certain financial or other measures. The fair value of restricted stock units is
based on the market price of the Company’s stock on the date of grant. The grant date fair value is amortized to compensation
expense on a straight-line basis over the requisite service period. The fair value of the restricted stock units that vested during
each of the years 2015, 2014, and 2013 was $126 million, $116 million, and $78 million, respectively.