The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $97 per share. You have employee stock options to purchase 1,000 TWTR shares for $102 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 87 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 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. Answer is complete but not entirely correct. Value of your TWTR options $ 11 X 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. > Answer is complete but not entirely correct. Value of the options $ 5 X
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $97 per share. You have employee stock options to purchase 1,000 TWTR shares for $102 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 87 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 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. Answer is complete but not entirely correct. Value of your TWTR options $ 11 X 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. > Answer is complete but not entirely correct. Value of the options $ 5 X
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 14P
Related questions
Question
![The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $97 per share. You have employee stock options
to purchase 1,000 TWTR shares for $102 per share. The options expire in three years. Assume that the annualized volatility of TWTR
stock is 87 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?
O 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.
X Answer is complete but not entirely correct.
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.
11 X
Answer is complete but not entirely correct.
Value of the options
$
5
d. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 62 percent?
Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar.
$
X Answer is complete but not entirely correct.
Value of the options
9 x](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe5584ed2-58f7-4523-b1ee-4ad399edb6ee%2F85978858-5ebf-4a70-82e3-859067cdc087%2Fsij9cok_processed.png&w=3840&q=75)
Transcribed Image Text:The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $97 per share. You have employee stock options
to purchase 1,000 TWTR shares for $102 per share. The options expire in three years. Assume that the annualized volatility of TWTR
stock is 87 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?
O 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.
X Answer is complete but not entirely correct.
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.
11 X
Answer is complete but not entirely correct.
Value of the options
$
5
d. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 62 percent?
Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar.
$
X Answer is complete but not entirely correct.
Value of the options
9 x
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