Suppose you believe that AppX stock is going to appreciate substantially in value in the next

year. Say the stocks current price is $100, and a call option expiring in one year has an exercise

price of $100, and selling at price of $10, With $10,000 to invest, you are considering three

alternatives

a. Invest all $10,000 in stocks

b. Invest all $10,000 in 10 option contracts (1 contract =100 options)

c. Buy 1 contracts (100 options) for $1,000 and invest the remaining $9,000 n a money fund

paying 4% annual interest rate

1) Please show your possible value of three portfolios for the four stock prices at $80, $100,

$110, and $120 in one year

2) Please show your return rate for these four stock prices in one year