Question: Hi I need help solving the following problem: Suppose you think FedEx stock is going to appreciate substantially in value in the next 6 months.

Hi I need help solving the following problem:

Suppose you think FedEx stock is going to appreciate substantially in value in the next 6 months. Say the stocks current price, S0, is $150, and the call option expiring in 6 months has an exercise price, X, of $150 and is selling at a price, C, of $6. With $15,000 to invest, you are considering three alternatives.

a. Invest all $15,000 in the stock, buying 100 shares.
b. Invest all $15,000 in 2,500 options (25 contracts).
c.

Buy 100 options (one contract) for $600, and invest the remaining $14,400 in a money market fund paying 4% in interest over 6 months (8% per year).

What is your rate of return for each alternative for the following four stock prices 6 months from now? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "$" and "%" signs in your response.)

The total value of your portfolio in six months for each of the following stock prices is:

Price of Stock 6 Months from Now
Stock Price $130 $150 $160 $170
All stocks (100 shares) $ $ $ $
All options (2,500 options) $ $ $ $
Bills + 100 options $ $ $ $

The percentage return of your portfolio in six months for each of the following stock prices is:

Price of Stock 6 Months from Now
Stock Price $130 $150 $160 $170
All stocks (100 shares) % % % %
All options (2,500 options) % % % %
Bills + 100 options % % % %

Thank you

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