The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $89 per share....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 O 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. 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 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. 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 O 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. 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 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.
Expert Answer:
Answer rating: 100% (QA)
TWTR Stock Option Analysis a Option Type This is a call option A call option gives you the right but ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
What is the unit cost per equivalent unit of beginning inventory in Department A? Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories,...
-
Consider two very long, straight fins of uniform cross section, as shown in Figure 3.17. The rectangular fin has dimensions t = 1 mm and w = 20 mm. The circular pin fin has the same cross-sectional...
-
1. How far can an economist contribute to this normative debate over the desirability of an excise tax? 2. What is the excess burden of a lump-sum tax? (For a clue, see Figure 12.14.)
-
(a) The MATLAB commands A = floor(10 * rand(6)), B = A² * A will result in a symmetric matrix with integer entries. Why? Explain. Compute B in this way and verify these claims. Next, partition B...
-
Prove the given identities. sin x(1 + cot 2 x) = csc x
-
Consider the net cash flows and salvage values shown below. Assume the alternatives can be indefinitely renewed with the same cash flows and salvage values. Using a MARR of 8%, specify the planning...
-
Rondeli Company manufactures bicycles and tricycles. For both products, materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Rondeli Company...
-
Charles holds a one-year $1000face value, taxable bond with a coupon rate of 7%. Suppose he faces a tax rate of 32%. How much tax will he pay for income earned on the investment? And, assuming he...
-
According to Peter Cappelli ("Big data comes to HR"), which is not a reason for the increasing use of data mining techniques in selection? Select the right answer. 1. Managers have found that the...
-
No small business can avoid creditors committees under Chapter 11. (True/False)
-
Trimpoint Maintenance, Inc. (TMI), a property maintenance service, leased storage and office space at Hilltop Corporate Complex. TMI also maintained and operated the complexs lighting, ventilation...
-
Ridgeline Transport is a common carrier. Sentinel Inn is a hotel. Temp Space is a warehouse company. In a bailment situation, the companies that are absolutely (strictly) liable for loss or damage to...
-
Jasper leases commercial space from Retro Enterprises for a three-year term. In the space, Jasper opens Suite Potato, a restaurant. The buildings plumbing is defective, and six months into the term,...
-
Ethan owns stock in Fast Burgers, Inc. He sells one-third of the shares and buys stock in Good Brew Corporation with the proceeds. On his death, his stock in the two companies will pass to his heirs....
-
Give the formulas for the following ionic compounds a) Potassium Iodide b) Cobalt (II) Chloride c) Chromium (III) Hydroxide
-
(a) Given a mean free path = 0.4 nm and a mean speed vav = 1.17 105 m/s for the current flow in copper at a temperature of 300 K, calculate the classical value for the resistivity of copper. (b)...
-
Use the Internet to access Home Depot's most recent annual report. a. What evidence did you find that Home Depot continues to rely on present worth analysis in its corporate decision making? b. Does...
-
Use an Internet search engine to identify three companies or agencies that use present worth analysis to make business decisions as evidenced in their annual reports.
-
Use the Internet to access ConocoPhillips's most recent annual report. a. What evidence do you find that ConocoPhillips continues to rely on present worth analysis in its corporate decision making?...
Study smarter with the SolutionInn App