Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, se, is $300, and

image text in transcribed
image text in transcribed
Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, se, is $300, and a call option expiring in one year has an exercise price, X of $300 and is selling at a price, C of $6. With $6,000 to Invest, you are considering three alternatives. a. Invest all $6,000 in the stock, buying 20 shares. b. Invest all $6,000 in 1,000 options (10 contracts). c. Buy 100 options (one contract) for $600, and invest the remaining $5,400 in a money market fund paying 6% in Interest over 6 months (12% 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: Price of Stock 6 Months from Now 280 S 300 $ 310$ $ 320 Stock Price All stocks (20 shares) All options (1.000 options) Bills 100 options What is your enter "O" wherever required. Negative amounts should be Indicated by a minus sign. Round the "Perc 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 280 $ 300 $ 310 $ 320 Stock Price All stocks (20 shares) All options (1,000 options) Bills + 100 options aces The percentage return of your portfolio in six months for each of the following stock prices is: S Price of Stock 6 Months from Now 280 s 300 $ 310 % % $ 320 % % Stock Price All stocks (20 shares) All options (1,000 options) Bills + 100 options

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forecasting And Predictive Analytics With Forecast X

Authors: Barry Keating, J. Holton Wilson, John Solutions Inc.

7th International Edition

1260085236, 9781260085235

More Books

Students also viewed these Finance questions