Walter Maxim, the CEO of Digital Storage Devices Has Been

question 31

Essay

Walter Maxim, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The equity is currently trading at £27 a share and the options are at the money.The volatility of the equity has been about .15 on an annual basis over the last several years.The option mature in 5 years, become exercisable in 3 years, and the risk free rate is 4%. What is the value of Mr.Maxim's options?

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Definitions:

Increase Side

In accounting, it refers to the side of a ledger account (debit or credit) where increases are recorded, depending on the nature of the account.

Decrease Side

The side of an account that is used to record decreases in value, typically the left side for assets and expense accounts, and the right side for liability, equity, and revenue accounts.

Title

A legal term referring to a person's formal right or ownership of an object, real estate, or intellectual property.

Cash Payments

Outflows of cash by an entity, typically for expenses, goods purchased, or services rendered.