Walter Maxim,the CEO of Digital Storage Devices Has Been Granted

question 31

Essay

Walter Maxim,the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about .15 on an annual basis over the last several years. The options 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:

Incidental Damages

Incidental damages refer to reasonable expenses incurred by a party as a result of another party’s breach of contract, including costs to mitigate damages.

Carrier

An entity that offers transportation services for goods or people, often used in the context of shipping or telecommunications.

Bailee

A bailee is a person or party to whom goods are delivered for a specific purpose, under an agreement or contract, with the obligation to return the goods after the purpose is fulfilled.

In Transit

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