Essay
A CEO is being granted 1,000,000 at-the-money options.The current stock price is $45,the continuously compounded risk-free rate is 5 percent,and the variance on the stock's return is .04.The options expire in 5 years.What is the value of the options contract? If the CEO had negotiated a larger salary and only 10,000 options,what would be the value of that options contract?
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d1 = [(R + .5σ2)(t)]/(σ2t).5 d1 = {[.05 + .5(.0...View Answer
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