Question
You spend $1,000 to buy 100 call options on IBM stock (expires after one year; each covers one share) with $100 strike price, and spend
You spend $1,000 to buy 100 call options on IBM stock (expires after one year; each covers one share) with $100 strike price, and spend $9,000 to buy T-bills with 2% annual interest rate. If stock price increases to $115, your one-year rate of return would be
The answer is 6.80%
Please explain how and why you got your answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Personal Finance
Authors: Jeff Madura
7th Edition
0134989961, 978-0134989969
