HRM & Finance Module 13 Assignment

HRM & Finance Module 13 Assignment

Call Option Values

1. What is the value of exercising a call option expiring on December 31, 2024 to buy 700 shares of employer’s stock at an exercise price of $16 on the following dates:

• May 19, 2022 when employer stock is traded at $17.00?

• June 8, 2022 when employer stock is traded at $17.50?

• May 19, 2023 when employer stock is traded at $20.00?

• November 21, 2023 when employer stock is traded at $12.50?

• January 24, 2024 when employer stock is traded at $19.00?

2. What is the value of exercising a call option expiring on June 30, 2025 to buy 1,000 shares of an employer’s stock at an exercise price of $25.00 on the following dates:
   • July 19, 2022 when employer stock is traded at $26.00?

• July 19, 2022 when employer stock is traded at $39.00?

• On October 29, 2022, the stock market crashes and the employer stock is traded in the market at $14.00 per share. What might the Board of Directors’ Compensation Committee suggest to the board to make the stock option a strong incentive again?

• What is the value of exercising the currently granted option when the stock is traded at less than the exercise price of $25.00?

• The options are repriced at $17.00 to buy 1,200 shares on November 24, 2022 with the same
  expiration date of June 30, 2025. What is the value of exercising the option on December 18, 2023
   when the employer’s stock is traded at $19.00?     

3. What is a common method for valuing a call option for stock that is given to an employee by a corporate employer? (Please highlight the correct answer.)
   • Using the Monte Carlo simulation
   • Using the Black-Scholes Module
   • Calculating the Benefit Cost Ratio
4. Which type of option would reward a corporate executive of a corporation for a decrease in the corporation’s stock price? (Please highlight the correct answer.)
   • Call option for the corporation’s stock
   • Put option for the corporation’s stock
   • Call and Put options for the corporation’s stock

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