Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stocks current price, S₀, is $60, and a call option expiring in one year has an exercise price, X, of $60 and is selling at a price, C, of $10. With $15,000 to invest, you are considering three alternatives.

a. Invest all $15,000 in the stock, buying 250 shares.

b. Invest all $15,000 in 1,500 options (15 contracts).

c. Buy 100 options (one contract) for $1,000, and invest the remaining $14,000 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 percentage return of your portfolio in six months for each of the following stock prices is:

Price of Stock 6 Months from Now 40 $ 60 $ Stock Price All stocks (250 shares) All options (1,500 options) Bills 100 options 70 $ 80 Price of Stock 6 Months from Now Stock Price All stocks (250 shares) All options (1,500 options) Bills 100 options 40 $ 60 70$ 80 0 0 0