1. Suppose you think Wal-Mart stock is going to appreciate in the next year. Current price...

 

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1. Suppose you think Wal-Mart stock is going to appreciate in the next year. Current price 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 invest all in 1,000 options (10 contracts). Alternatively, you can invest all in the stock. What is the rate of return for each alternative if one year later the stock price is $105? (10%) 1. Suppose you think Wal-Mart stock is going to appreciate in the next year. Current price 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 invest all in 1,000 options (10 contracts). Alternatively, you can invest all in the stock. What is the rate of return for each alternative if one year later the stock price is $105? (10%)