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Problem 16 Suppose you think Apple's stock k going to appreciate substantially in value in the next year. Say the stock's current pries, Ss, is

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Problem 16 Suppose you think Apple's stock k going to appreciate substantially in value in the next year. Say the stock's current pries, Ss, is $100, and a call option expiring in one year has an exercise price, X. of $100 and is selling at price of $10. With $10,000 to invest, you are consering three alternatives. Alternative A: invest all $10,000 in the stock, buying 100 shares Alternative B:invest $10,000 in 1000 options (ie to contracts of 100 shares per contract Alternative C: buy 100 options (ie. I contract) for $1,000, and invest the remaining $9,000 na money market fund paying 4% annual interest. What is your rate of return for each alternative for the following four stock prices in one year? Summarize your results in the table and diagram below. 580 $110 5120 Alternative A. All stocks [100 shares) 8. All options [1,000 shares C Bilis + 100 options For the diagram: the x-axis is the stock price is is the rate of return

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