You have $40,000 to invest. You are thinking of either buying 610 shares of Ford stock for $65.5 each, or buying 19,801 call options on Ford stock that expire in six months, have an exercise price of $70 and cost $2.02 each.

Part 1

What is your profit if you buy the shares and the stock price is $20 in six months (in $)?

Part 2

What is your profit if you buy the options and the stock price is $50 in six months (in $)?

Part 3

What is your rate of return if you buy the shares and the stock price is $70 in six months?

Part 4

What is your rate of return if you buy the options and the stock price is $100 in six months?