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Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stock's current price, So, is $125, and

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Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stock's current price, So, is $125, and a call option expiring in one year has an exercise price, X, of $125 and is selling at a price, C. of $8. With $16,000 to invest, you are considering three alternatives. a. Invest all $16,000 in the stock, buying 128 shares. b. Invest all $16,000 in 2.000 options (20 contracts). c. Buy 100 options (one contract) for $800, and invest the remaining $15,200 in a money market fund paying 5% in interest over 6 months (10% per year). What is your rate of return for each alternative for the following four stock prices in 6 months? (Leave no cells blank - be certain to enter "O" wherever required. Negative amounts should be indicated by a minus sign. Round the "Percentage return of your portfolio (Bills + 100 options)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the following stock prices is: $ Price of Stock 6 Months from Now 105 $ 125 $ 135 S 145 Stock Price All stocks (128 shares) All options (2,000 options) Bills + 100 options The percentage return of your portfolio in six months for each of the following stock prices is: Price of Stock 6 Months from Now $ 125 $ 135 105 Stock Price All stocks (128 shares) All options (2,000 options) Bills + 100 options

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