Required What was the estimated value of these employee stock options per share of stock? (Note. Hamdan pays no dividends.) How many put option contracts are required pric

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 2MAD
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5. February 4, 2022, Hamdan, Inc., had outstanding employee stock options representing
over 272 million shares of its stock. Hamdan accountants estimated the value of these
options using the Black-Scholes
Merton formula and the following assumptions:
S = current stock price = $20.72
K = option strike price = $23.15
r=risk-free interest rate= .043
o=stock volatility = .29
T= time to expiration = 3.5 years
Suppose you hold Hamdan employee stock options representing options to buy
10.000shares of LLL stock. You wish to hedge your position by buying put options
with three-month expirations and a $22.50 strike price.
Required
a. What was the estimated value of these employee stock options per share of stock?
(Note. Hamdan pays no dividends.)
b. How many put option contracts are required
Transcribed Image Text:5. February 4, 2022, Hamdan, Inc., had outstanding employee stock options representing over 272 million shares of its stock. Hamdan accountants estimated the value of these options using the Black-Scholes Merton formula and the following assumptions: S = current stock price = $20.72 K = option strike price = $23.15 r=risk-free interest rate= .043 o=stock volatility = .29 T= time to expiration = 3.5 years Suppose you hold Hamdan employee stock options representing options to buy 10.000shares of LLL stock. You wish to hedge your position by buying put options with three-month expirations and a $22.50 strike price. Required a. What was the estimated value of these employee stock options per share of stock? (Note. Hamdan pays no dividends.) b. How many put option contracts are required
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