(60 pts) You are considering the results of the following strategies:

Alternative 1: Allocate 100% of your wealth to buying stock.

Alternative 2: Allocate 93% of your wealth to buying Treasury Bills and the remaining 7% to buying call options on S&P 500 index.

• Your wealth is $100
• The current price of stock is $100
• The call option premium is $7 with an exercise price of 105
• Treasury Bill return is 2.5% and its price is $93.

Show your full calculations and show your final results in the following table on next page:

Alternative #1			Alternative #2
Likely Stock Prices at year end	Gain or Loss	ROR	Treasury Bill Year-End Results	Call Value at year-end	Portfolio Value at year-end	Gain or Loss	ROR
100
70
130