options, futures, and other alternatives

Project Description:

suppose you think wal-mart stock is going to appreciate substantially in value in the next year. say the stock's 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.
what is your rate of return for each alternative for four stock prices one year from now?
summarize your results in a table that shows the rate of return on investment for all three alternatives.

price of stock 6 months from now
$80 $100 $110 $120

a) all stock options 100 shares
b) all options 1000 shares
c)bills+100 options



show in diagram

rate of return

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Price Type: Negotiable

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