Suppose you think Appx stock is going to appreciate substantially in value in the next year. Say the stock's current price, $s_0,$ is $$125,$

and a call option expiring in one year has an exercise price, $x,$ of $$125$ and is selling at a price, $c_0,$ of $$10.$ With $$11,000$ to invest, you

are considering three alternatives.

a$.$ Invest all $$11,000$ in the stock, buying $88$ shares.

b$.$ Invest all $$11,000$ in $1,100$ options $(10$ contracts$).$

c$.$ Buy $100$ options $($one contract$)$ for $$1,000,$ and invest the remaining $$10,000$ 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

In terms of

dollar returns

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.

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