Question
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $75 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 $75 per share. You have employee stock options to purchase 1,000 TWTR shares for $80 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 65 percent and that the interest rate is 3 percent. (Assume the options are European options that may only be exercised at the maturity date.)
1. Using an option pricing calculator estimate the value of your TWTR options. Note: Round your intermediate calculations to 2 decimal places and the final answer to the nearest whole dollar.
2. 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 the final answer to the nearest whole dollar.
3. What is the estimated value of the options if their maturity is three years, but TWTRs volatility is 40 percent? Note: Round your intermediate calculations to 2 decimal places and the final answer to the nearest whole dollar.
Note: The previous answers given were incorrect of 1. 52,000 2. 80,000 3. 48,000
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