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Suppose you think AppX stock is going to appreclate substantlally In value In the next year. Say the stock's current price, s0, Is $40. and
Suppose you think AppX stock is going to appreclate substantlally In value In the next year. Say the stock's current price, s0, Is $40. and a call option expiring in one year has an exercise price, X, of $40 and is selling at a price, C, of $14. With $12600 to invest, you are considering three alternatlves. a. Invest all $12,600 in the stock, buying 315 shares. b. Invest all $12,600 in 900 options (9 contracts). c. Buy 100 options (one contract) for $1,400, and Invest the remaining $11,200 in a money market fund payIng 5% in interest over 6 months (10\% per year). What is your rate of return for each alternatlve 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 optlons)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the followng stock prices is: The percentage return of your portfolio in sIx months for each of the following stock prices is
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