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calculate the value of the stock options. (C

calculate the value of the stock options. (C

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Cheryl Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Cheryl 16,000 at-the-money European call options on the company's stock, which is currently trading at $110 per share. The stock pays no dividends. The options will expire in five years and the standard deviation of the returns on the stock is 56 percent. Treasury bills that mature in five years currently yield a continuously compounded interest rate of 8 percent. Use the Black-Scholes model to calculate the value of the stock options. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of option grant
Transcribed Image Text:Cheryl Levin is the chief executive officer of Mountainbrook Trading Company. The board of directors has just granted Cheryl 16,000 at-the-money European call options on the company's stock, which is currently trading at $110 per share. The stock pays no dividends. The options will expire in five years and the standard deviation of the returns on the stock is 56 percent. Treasury bills that mature in five years currently yield a continuously compounded interest rate of 8 percent. Use the Black-Scholes model to calculate the value of the stock options. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Value of option grant
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