The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $67 per share. You have employee stock options to purchase 1,000 TWTR shares for $72 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 57 percent and that the interest rate is 2.6 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 atlerieri.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. Value of your TWTR options
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $67 per share. You have employee stock options to purchase 1,000 TWTR shares for $72 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 57 percent and that the interest rate is 2.6 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 atlerieri.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. Value of your TWTR options
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 14P
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Question
![The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $67 per share. You have employee stock options
to purchase 1,000 TWTR shares for $72 per share. The options expire in three years. Assume that the annualized volatility of TWTR
stock is 57 percent and that the interest rate is 26 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✔
O Put
b. Using an option pricing calculator such as the one atlerieri.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.
Value of your TWTR options
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.
Value of the options](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa0a6d064-d60f-4f54-aa81-ca6ff52cfb9a%2Fa266fcba-86f8-41b9-aead-980f2871e4a8%2Fz929ob_processed.png&w=3840&q=75)
Transcribed Image Text:The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $67 per share. You have employee stock options
to purchase 1,000 TWTR shares for $72 per share. The options expire in three years. Assume that the annualized volatility of TWTR
stock is 57 percent and that the interest rate is 26 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✔
O Put
b. Using an option pricing calculator such as the one atlerieri.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.
Value of your TWTR options
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.
Value of the options
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