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# Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stockâs 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

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Nestor RutherfordLv2
28 Sep 2019

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