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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, S, is $150, 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, S, is $150, and the call option expiring in one year has an exercise price. X. of $150 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 100 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% interest over 6 months (10% per year). What is your rate of return for each alternative for four stock prices 6 months? Price of Stock 6 months from Now $150 5 160 $170 a. All stocks (100 shares) b. All options (1.000 shares) c. Bills + 100 options Price of Stock 6 months from Now $130 5150 $160 $170 a. All stocks (100 shares) b. All options (1.000 shares) c. Bills + 100 options

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