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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
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 $13. With $39,000 to invest, you are considering three alternatives a. Invest all $39,000 in the stock, buying 312 shares b. Invest all $39,000 in 3,000 options (30 contracts). C. Buy 100 options (one contract) for $1,300, and invest the remaining $37,700 in a money market fund paying 4% in interest over 6 months (8% 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 Stock Price All stocks (312 shares) All options (3,000 options) Bills 100 options 125 S 135 S 145 The percentage return of your portfolio in six months for each of the following stock prices is Price of Stock 6 Months from Novw 105 125 145 Stock Price All stocks (312 shares) All options (3,000 options) Bills 100 options 135
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