Suppose you think FedEx stock is going to appreciate substantially in value in the next $6$ months.

Say the stock's current price, $S_0,$ is $$100,$ and the call option expiring in $6$ months has an exercise

price, $x,$ of $$100$ and is selling at a price, $C,$ of $$10.$ With $$10,000$ to invest, you are considering

three alternatives.

a$.$ Invest all $$10,000$ in the stock, buying $100$ shares.

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

c$.$ Buy $100$ options $($one contract$)$ for $$1,000,$ and invest the remaining $$9,000$ in a money market

fund paying $4\%$ in interest over $6$ months $(8\%$ per year$).$

What is your rate of return for each alternative for the following four stock prices $6$ months

from now? Summarize your results in the table and diagram below.

Price of Stock $6$ Months from Now

$$80,$$$100,$$$110,$$$120$

a$.$ All stocks $(100$ shares$)$

b$.$ All options $(1,000$ shares$)$

c$.$ Bills $+100$ options

Rati