Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stocks current price, S₀, is $40, and a call option expiring in one year has an exercise price, X, of $40 and is selling at a price, C, of $14. With $12,600 to invest, you are considering three alternatives.

a. Invest all $12,600 in the stock, buying 315 shares.

b. Invest all $12,600 in 900 options (9 contracts).

c. Buy 100 options (one contract) for $1,400, and invest the remaining $11,200 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 "0" 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:

The total value of your portfolio in six months for each of the following stock prices is: Answer is complete and correct. 40 $ Stock Price All stocks (315 shares) All options (900 options) Bills + 100 options Price of Stock 6 Months from Now 35 $ 40 $ 50 11,025 12,600 15,750 9,000 11,760 11,760 12,760 60 18,900 18,000 13,760 O The percentage return of your portfolio in six months for each of the following stock prices is: Answer is complete but not entirely correct. $ $ % % Price of Stock 6 Months from Now $ 40 $ 50 0 % 25 (100) (21) (6.67) 1.27 Stock Price All stocks (315 shares) All options (900 options) Bills + 100 options % 35 (13) (100) (6.67) 60 50 59 9.21 -20.53% (10000-12600)/12500 58.73% (20000-12600\/12600 The total value of your portfolio in six months for each of the following stock prices is: Answer is complete and correct. 40 $ Stock Price All stocks (315 shares) All options (900 options) Bills + 100 options Price of Stock 6 Months from Now 35 $ 40 $ 50 11,025 12,600 15,750 9,000 11,760 11,760 12,760 60 18,900 18,000 13,760 O The percentage return of your portfolio in six months for each of the following stock prices is: Answer is complete but not entirely correct. $ $ % % Price of Stock 6 Months from Now $ 40 $ 50 0 % 25 (100) (21) (6.67) 1.27 Stock Price All stocks (315 shares) All options (900 options) Bills + 100 options % 35 (13) (100) (6.67) 60 50 59 9.21 -20.53% (10000-12600)/12500 58.73% (20000-12600\/12600