Freddie Mac 2009 Annual Report Download - page 274

shares of common stock authorized for grant to members of our Board of Directors in accordance with the Directors’ Plan
totaled 2.4 million shares, of which approximately 0.9 million shares had been issued and approximately 1.5 million shares
remained available for grant.
See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for a description of the accounting
treatment for stock-based compensation, including grants under the ESPP, Employee Plans and Directors’ Plan.
Estimates used to determine the assumptions noted in the table below are determined as follows:
(a) the expected volatility is based on the historical volatility of the stock over a time period equal to the expected life;
(b) the weighted average volatility is the weighted average of the expected volatility;
(c) the weighted average expected dividend yield is based on the most recent dividend announcement relative to the
grant date and the stock price at the grant date;
(d) the weighted average expected life is based on historical option exercise experience; and
(e) the weighted average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the
grant.
Changes in the assumptions used to calculate the fair value of stock options could result in materially different fair
value estimates. The actual value of stock options will depend on the market value of our common stock when the stock
options are exercised.
Table 12.1 summarizes the assumptions used in determining the fair values of options granted under our stock-based
compensation plans using a Black-Scholes option-pricing model as well as the weighted average grant-date fair value of
options granted and the total intrinsic value of options exercised.
Table 12.1 — Assumptions and Valuations
(1)
2009
(2)
2008 2007 2009
(3)
2008
(3)
2007
(3)
ESPP
Employee Plans and
Directors’ Plan
(dollars in millions, except share-related amounts)
Assumptions:
Expected volatility . . . . . . . . . ...................... N/A 120.1% to 141.3% 11.1% to 45.4% N/A N/A N/A
Weighted average:
Volatility . . . . . . . . . . . . . . ...................... N/A 136.05% 26.22% N/A N/A N/A
Expected dividend yield . . . . ...................... N/A 8.73% 3.44% N/A N/A N/A
Expected life . . . . . . . . . . . ...................... N/A 3months 3 months N/A N/A N/A
Risk-free interest rate . . . . . . ...................... N/A 1.68% 4.57% N/A N/A N/A
Valuations:
Weighted average grant-date fair value of options granted . .... N/A $5.81 $11.25 N/A N/A N/A
Total intrinsic value of options exercised ................ N/A $1 $2 N/A N/A $7
(1) Following the implementation of the conservatorship, we have suspended the operation of our ESPP and are no longer making grants under the
Employee Plans or Directors’ Plan.
(2) No options to purchase stock were granted or exercised under the ESPP in 2009.
(3) No options were granted under the Employee Plans and Directors’ Plan in 2009, 2008 or 2007. No options were exercised under the Employee Plans
and Directors’ Plan in 2009 and 2008.
Table 12.2 provides a summary of option activity under the Employee Plans and Directors’ Plan for the year ended
December 31, 2009, and options exercisable at December 31, 2009.
Table 12.2 — Employee Plans and Directors’ Plan Option Activity
(1)
Stock
Options
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 2009.................................... 4,468,262 $59.51
Granted . ................................................. — —
Exercised ................................................. — —
Forfeited or expired.......................................... (694,420) 60.01
Outstanding at December 31, 2009 . . ............................... 3,773,842 59.39 2.74 years $—
Exercisable at December 31, 2009 . . ............................... 3,748,517 59.39 2.72 years $—
(1) Following the implementation of the conservatorship, we are no longer making grants under our Employee Plans and our Directors’ Plan.
During 2009, 2008 and 2007, we did not pay cash to settle share-based liability awards granted under share-based
payment arrangements associated with the Employee Plans and the Directors’ Plan.
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