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Business, 06.05.2020 06:08 zetrenne73

Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stock’s current price, So, is $120, and a call option expiring in one year has an exercise price, X, of $120 and is selling at a price, C, of $18. With $14,400 to invest, you are considering three alternatives.
a. Invest all $14,400 in the stock, buying 120 shares.
b. Invest all $14,400 in 800 options (8 contracts).
c. Buy 100 options (one contract) for $1,800, and invest the remaining $12,600 in a money market fund paying 6% in interest over 6 months (12% per year).
Required:
1. What is your rate of return for each alternative for the following four stock prices in one year?

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