Suppose you think Apple stock is going to appreciate substantially in value in the next year. Say the stockâs current price, *S*_{0}, 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, *S*_{0}, 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**