The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $99 per share. You have employee stock options to purchase 1,000 TWTR shares for $104 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 89 percent and that the interest rate is 2.7 percent. (Assume the options are European options that may only be exercised at the maturity date.) 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. 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. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 64 percent? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar.
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $99 per share. You have employee stock options to purchase 1,000 TWTR shares for $104 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 89 percent and that the interest rate is 2.7 percent. (Assume the options are European options that may only be exercised at the maturity date.) 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. 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. What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 64 percent? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar.
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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Hh.141.
Transcribed Image Text:The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $99 per share. You have employee
stock options to purchase 1,000 TWTR shares for $104 per share. The options expire in three years. Assume that the
annualized volatility of TWTR stock is 89 percent and that the interest rate is 2.7 percent. (Assume the options are
European options that may only be exercised at the maturity date.)
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.
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.
What is the estimated value of the options if their maturity is three years, but TWTR's volatility is 64 percent?
Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar.
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