uppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stocks current price, S₀, is $100, and the 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:

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% interest annually.

a. Calculate the value of the investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required.)

	Price of Stock 1 Year from Now
	$80	$100	$110	$120
All stocks (100 shares)	$	$	$	$
All options (1,000 shares)	$	$	$	$
Bills + 100 options	$	$	$	$

b. Calculate the rate of return on investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.)

	Percentage of Stock 1 Year from Now
	$80	$100	$110	$120
All stocks (100 shares)	%	%	%	%
All options (1,000 shares)	%	%	%	%
Bills + 100 options	%	%	%	%