Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following table lists prices of Amazon options in January 2 0 1 8 when Amazon stock was selling for $ 1 , 4 0

The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,400.
Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,4001.20=$1,680.00 or fall to
$1,4001.20=$1,166.67.
a. What would be your percentage return on a January expiration call option with an exercise price of $1,400 if the stock price
rose? (Round your answer to 2 decimal places.)
b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.)
c. Which is riskier: the stock or the option?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions