Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stockâs 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.
a. Calculate the value of the investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required.)
The Prices are $80, $100, $110, $120
All stocks(100 shares)
All Options (1000 Shares)
Bills + 100 options
b. Calculate the rate of return on investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.)
The Prices are $80, $100, $110, $120
All stocks(100 shares)
All Options (1000 Shares)
Bills + 100 options
Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stockâs 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.
a. Calculate the value of the investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required.)
The Prices are $80, $100, $110, $120
All stocks(100 shares)
All Options (1000 Shares)
Bills + 100 options
b. Calculate the rate of return on investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.)
The Prices are $80, $100, $110, $120
All stocks(100 shares)
All Options (1000 Shares)
Bills + 100 options
Related questions
Sikes Corporation, whose annual accounting period ends onDecember 31, issued the following bonds:
| Date of bonds:January 1, 2008. |
| Maturity amountand date: $250,000 due in 12 years (December 31, 2017). |
| Interest: 11percent per year payable each December 31. |
| Date issued:January 1, 2008. |
| Required: |
Provide the following amounts to bereported on the January 1, 2008, financial statements immediatelyafter the bonds are issued: (Leave no cells blank - be certain to enter "0"wherever required. Input all amounts as positive values. Omit the"$" sign in your response.) |
| Case A (issued at 100) | Case B (issued at 95.2) | Case C (issued at 102.4) | ||
| a. | Bonds payable | $ | $ | $ |
| b. | Unamortizedpremium or discount | |||
| c. | Unpaid bondliability | $ | $ | $ |
E15-12 Investment center analysis; ROIand residual income [LO 9]
| MilanoCorporation has three operating divisions and requires a 12% returnon all investments. Selected information is presented here: |
| Required: |
| Calculate themissing amounts for each division. (Leave no cells blank, be certain enter '0'wherever required. Omit the "$" & "%" signs in yourresponse.) |
| Division A | Division B | Division C | |||||||
| Revenues | $ | 500,000 | |||||||
| Operating income | $ | 60,000 | $ | 80,000 | |||||
| Operating assets | $ | 250,000 | $ | 600,000 | |||||
| Margin | % | 12 | % | % | |||||
| Turnover | turns | 1 | turn | 2 | turns | ||||
| ROI | % | % | % | ||||||
| Residual income | $ | $ | 20,000 | ||||||
