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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, Sa, 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, Sa, 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 125 S 105 S Stock Price All stocks (312 shares) All options (3,000 options) Bills 100 options 135 145 The percentage return of your portfolio in six months for each of the following stock prices is: Price of Stock 6 Months from Now 135 145 Stock Price All stocks (312 shares) All options (3,000 options) Bills100 options 105 125

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