Question
Suppose you believe that AppX stock is going to appreciate substantially in value in the next year. Say the stocks current price is $60, and
Suppose you believe that AppX stock is going to appreciate substantially in value in the next year. Say the stocks current price is $60, and a call option expiring in one year has an exercise price of $60 and selling at price of $10, With $15,000 to invest, you are considering three alternatives a. Invest all $15,000 in stocks, buying 250 shares b. Invest all $15,000 in 1,500 options (15 contracts) c. Buy 100 options (one contract) for $1,000 and invest the remaining $14,000 in a money fund paying 5% annual interest rates over 6 months (10% per year. 1) Please show your possible value of three portfolios for the four stock prices at $40, $60, $70, and $80 in one year 2) Please show your return rate for these four stock prices in one year
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started