The current price of DISH Network stock is $31.50 per share, and six-month European call options on the stock with a strike price of 532.50 are currently trading at $3.60. An investor, who has $10,000 of capital to invest, believes that the price of the stock over the next six months. The investor is trying to decide between two strategies - (A) buying shares or (B) buying call options. What return will each strategy produce after six months, if the investor is correct in their assessment of the stock? Assume that either a whole number of shares can be bought OR a whole number of option contracts cane be bought (representing the right to buy 100 shares per option contract). This information is summarized in the tables below. Strategy A: Strategy Buy shares B: Buy call options $31.50 $3.60 $32.50 Price of security Strike price of the call options Amount available for investment $10,000 20% Anticipated change in stock price How many shares can be purchased under Strategy A? How many option contracts can be purchased under Strategy B? (Round your answers to the nearest whole number.) Strategy A Strategy B How much uninvested cash does the investor still have? (Assume that this cash remains in a non-interest-bearing account.) Strategy A Strategy B Assume that the anticipated change in stock price is realized over the next six months. What is the price of a share of the stock? What is the value of all of the shares purchased if the anticipated change in stock price is realized? What is the intrinsic value of the options purchased, assuming they are all exercised at maturity if the anticipated change in stock price is realized? Strategy A Strategy B What is the total profit made in dollar terms? Strategy A Strategy B The current price of DISH Network stock is $31.50 per share, and six-month European call options on the stock with a strike price of 532.50 are currently trading at $3.60. An investor, who has $10,000 of capital to invest, believes that the price of the stock over the next six months. The investor is trying to decide between two strategies - (A) buying shares or (B) buying call options. What return will each strategy produce after six months, if the investor is correct in their assessment of the stock? Assume that either a whole number of shares can be bought OR a whole number of option contracts cane be bought (representing the right to buy 100 shares per option contract). This information is summarized in the tables below. Strategy A: Strategy Buy shares B: Buy call options $31.50 $3.60 $32.50 Price of security Strike price of the call options Amount available for investment $10,000 20% Anticipated change in stock price How many shares can be purchased under Strategy A? How many option contracts can be purchased under Strategy B? (Round your answers to the nearest whole number.) Strategy A Strategy B How much uninvested cash does the investor still have? (Assume that this cash remains in a non-interest-bearing account.) Strategy A Strategy B Assume that the anticipated change in stock price is realized over the next six months. What is the price of a share of the stock? What is the value of all of the shares purchased if the anticipated change in stock price is realized? What is the intrinsic value of the options purchased, assuming they are all exercised at maturity if the anticipated change in stock price is realized? Strategy A Strategy B What is the total profit made in dollar terms? Strategy A Strategy B
