Nu Skin 2010 Annual Report - Direct Selling News

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements
The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and
weighted-average fair values as follows:
Year Ended December 31,
Stock Options: 2008 2009 2010
Weighted average grant date fair value of grants . . . . . . . . . . . . . . . . . $ 4.69 $ 2.84 $ 8.61
Risk-free interest rate (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0% 2.3% 1.8%
Dividend yield (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 3.2% 2.6%
Expected volatility (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.1% 40.7% 37.8%
Expected life in months (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 months 69 months 69 months
(1)
The risk-free interest rate is based upon the rate on a zero coupon U.S. Treasury bill, for periods within the contractual life of the option, in effect at the time of the grant.
(2)
The dividend yield is based on the average of historical stock prices and actual dividends paid.
(3)
Expected volatility is based on the historical volatility of our stock price, over a period similar to the expected life of the option.
(4)
The expected term of the option is based on the historical employee exercise behavior, the vesting terms of the respective option, and a contractual life of either seven or ten years.
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