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Suppose you think FedEx stock is going to appreciate substantially in value in the next 6 months. Say the stock's current price, Sq, is $75,
Suppose you think FedEx stock is going to appreciate substantially in value in the next 6 months. Say the stock's current price, Sq, is $75, and the call option expiring in 6 months has an exercise price, X, of $75 and is selling at a price, C, of $21. With $21,000 to invest, you are considering three alternatives. Invest all $21,000 in the stock, buying 280 shares. Invest all $21,000 in 1,000 options (10 contracts). Buy 100 options (one contract) for $2,100, and invest the remaining $18,900 in a money market fund paying 6% in interest over 6 months (12% per year). What is your rate of return for each alternative for the following four stock prices 6 months from now? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "$" and signs "%" in your response.) The total value of your portfolio in six months for each of the following stock prices is: The percentage return of your portfolio in six months for each of the following stock prices is
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