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Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, so, is $150,
Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, so, is $150, and a call option expiring in one year has an exercise price, X, of $150 and is selling at a price, Co, of $6. 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 2,500 options (6 contracts). c. Buy 100 options (one contract) for $600, and invest the remaining $14,400 in a money market fund paying 4% annual interest. What is your rate of return for each alternative for the following four stock prices in one year? Complete this question by entering your answers in the tabs below. In terms of dollar returns In terms of rate of return What is your rate of return for each alternative for the following four stock prices in one year? The total value of your portfolio in one year for each of the following stock prices is: Note: 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. Stock Price a. All stocks (100 shares) b. All options (2,500 options) c. Bills +100 options Price of Stock one year from Now $ 130 $ 150 $ 160 $ 170 Show less
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