The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $69 per share. You have employee stock optionsto purchase 1,000 TWTR shares for $74 per share. The options expire in three years. Assume that the annualized volatility of TWTRstock is 59 percent and that the interest rate is 2.7 percent. (Assume the options are European options that may only be exercised atthe maturity date.)a. Is this option a call or a put?Call○ Putb. 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 optionsc. 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

Stock price = $69Strike price = $74Interest rate = 2.7%Volatility = 59%

Answered: The common shares of Twitter,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 14P

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