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Question 30 1 pts Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stock's current price,
Question 30 1 pts Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stock's current price, S_0, is $100, and a call option expiring in one year 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. 1. Invest all $10,000 in the stock, buying 100 shares. 2. Invest all $10,000 in 1,000 options (10 contracts). 3. Buy 100 options (one contract) for $1,000, and invest the remaining $9,000 in a money market fund paying 4% annual interest. If the stock price one year from now is $100, which investment strategy generates the highest return? 1 O2 O 3 Previous Next
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