Question: Buzz Lightyear, the chief executive officer (CEO) of Closet Toys was granted 10 million options. The stock price at the time of the options grant was $50. Assume that his options are at the money. The risk-free rate is 7% and the options expire in 5 years. The annual standard deviation of CT's stock is 30%.Please show all calculations.
a) What is the value of a call option on one share of CT stock?
b) What is the value in dollars of Buzz Lightyear's options?
c) Do these options grant him the right to go to infinity and beyond?