Suppose you thinkTeslastock is going to appreciate substantially in value in the next year. Say the stock's current price, S,is $400, and a call option expiring in one year has an exercise price, X, of $390and is selling at a price, C, of $40. With $40,000 to invest, you are considering three investment alternatives.

Alternative A: Invest all $40,000 in the stock, buying 100 shares.

Alternative B: Invest all $40,000 in 1,000 options (10 contracts).

Alternative C: Buy 100 options (one contract) for $4,000, and invest the remaining fund in a money market fund paying 8% annual interest.

Suppose Tesla stock goes up in price to $600 one year later.

a.What is total value of the investment for alternative A?(sample answer: $185.75)

b.What is your rate of return for alternative A?(sample answer: 25.30%)

c.What is total value of the investment for alternative C?(sample answer: $185.75)

d.What is your rate of return for alternative C?(sample answer: 25.30%)