Courtney receives stock options for 12,000 shares of XYZ Corporation with an exercise price of $10 when the stock is trading on the national exchange for $10 per share. The XYZ company plan is an Incentive Stock Option Plan. Which of the following statements are true regarding the options?

1. Courtney will be required to hold any ISOs for more than a year after exercise and more than two years from the grant date to have long-term capital gains.

2. 2,000 of the options are NQSOs.

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.

Explain how you came to your answer.