Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The common shares of Twitter. Incorporated (TWTR) recently traded on the NYSE for $89 per share. You have employee stock options to purchase 1,000 TWTR

image text in transcribed
The common shares of Twitter. Incorporated (TWTR) recently traded on the NYSE for $89 per share. You have employee stock options to purchase 1,000 TWTR shares for $94 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 79 percent and that the interest rate is 2.2 percent. (Assume the options are European options that may only be exercised at the maturity date.) a. Is this option a call or a put? Call Put b. Using an option pricing calculator such as the one at eriericom/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 54 percent? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Oxford Handbook Of The Sociology Of Finance

Authors: Karin Knorr Cetina, Alex Preda

1st Edition

0198708777, 978-0198708773

More Books

Students also viewed these Finance questions