Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $101 per share. You have employee stock options to purchase 1,000 TWTR
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $101 per share. You have employee stock options to purchase 1,000 TWTR shares for $106 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 91 percent and that the interest rate is 2.8 percent. (Assume the options are European options that may only be exercised at the maturity date.) Is this option a call or a put? multiple
a. Is this option a call or a put? Call Put b. Using an option pricing calculator such as the one at erieri.com/blackscholes, estimate the value of your TWTR options Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. c. What is the estimated value of the options if their maturity is six months instead of three years? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. d. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 66 percent? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollarStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started