Suppose you think AppX stock is going to appreciate substantially in value in the next year....

 

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Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, So, is $60, and a call option expiring in one year has an exercise price, X, of $60 and is selling at a price, C, of $10. With $15,000 to invest, you are considering three alternatives. a. Invest all $15,000 in the stock, buying 250 shares. b. Invest all $15,000 in 1,500 options (15 contracts). c. Buy 100 options (one contract) for $1,000, and invest the remaining $14,000 in a money market fund paying 5% in interest over 6 months (10% per year). What is your rate of return for each alternative for the following four stock prices in 6 months? (Leave no cells blank - be certain to enter "O" wherever required. Negative amounts should be indicated by a minus sign. Round the "Percentage return of your portfolio (Bills + 100 options)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the following stock prices is: Stock Price All stocks (250 shares) All options (1,500 options) Bills + 100 options $ 40 $ Price of Stock 6 Months from Now 60 $ 70 $ 80 The percentage return of your portfolio in six months for each of the following stock prices is: Stock Price All stocks (250 shares) All options (1,500 options) Bills +100 options Price of Stock 6 Months from Now $ 40 $ % 60 % $ 70 $ 80 % % Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, So, is $60, and a call option expiring in one year has an exercise price, X, of $60 and is selling at a price, C, of $10. With $15,000 to invest, you are considering three alternatives. a. Invest all $15,000 in the stock, buying 250 shares. b. Invest all $15,000 in 1,500 options (15 contracts). c. Buy 100 options (one contract) for $1,000, and invest the remaining $14,000 in a money market fund paying 5% in interest over 6 months (10% per year). What is your rate of return for each alternative for the following four stock prices in 6 months? (Leave no cells blank - be certain to enter "O" wherever required. Negative amounts should be indicated by a minus sign. Round the "Percentage return of your portfolio (Bills + 100 options)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the following stock prices is: Stock Price All stocks (250 shares) All options (1,500 options) Bills + 100 options $ 40 $ Price of Stock 6 Months from Now 60 $ 70 $ 80 The percentage return of your portfolio in six months for each of the following stock prices is: Stock Price All stocks (250 shares) All options (1,500 options) Bills +100 options Price of Stock 6 Months from Now $ 40 $ % 60 % $ 70 $ 80 % %

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THE TOTAL VALUE OF THE PORTFOLIO IN SIX MONTHS IS ILLUSTRATED BELOW Price of stock 6 months from ... View the full answer