William Hurt is the Chief Executive Officer of the First Pacific Trading Company (FPTC).

His annual straight salary is \($1\) million.

The current value of FPTC stock is \($50\) per share. Mr. Hurt has just been granted options on \($1\) million in shares of FPTC stock at the money by FPTC’s board of directors.

The risk-free rate is 6 percent. The options have a maturity of four years. The volatility of FPTC stock has been about 25 percent on an annual basis. Determine the value of Mr.

Hurt’s stock options.