Illustrate what is your rate of return for each alternative

Reference no: EM1332638

Wal-Mart stock

Suppose you think Wal-Mart stock is going to appreciate substantially in value in the next year. Say the stock'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.

What is your rate of return for each alternative for four stock prices one year from now?
Summarize your results in a table that shows the rate of return on investment for all three alternatives.

Reference no: EM1332638

Questions Cloud

Explain what competitive advantage is from benchmarking : Explain What competitive advantage is possible from benchmarking the WEB sites of your competitors and customers

Evaluate the best cost-allocation base to use : What considerations does management have when trying to evaluate the best cost-allocation base to use

Advent and increasing popularity of social networking : With the advent and increasing popularity of social networking, individuals are connected to everyone but connecting to no one.

Explain what role should government play : What role should HRM personnel play in employee relations within Organizations and What role should government play

Illustrate what is your rate of return for each alternative : Illustrate what is your rate of return for each alternative for four stock prices one year from now. Summarize your results in a table that shows the rate of return on investment for all three alternatives.

Find the recent product recall at the united states : Find the recent Product Recall at the United States Consumer Product Safety Commission (USCPSC).

Suppose cookies are not disabled on the client : suppose cookies are not disabled on the client.

Explain selection processes and strategies : Employment Selection Processes - prepare a paper in which you analyze the two different selection processes and strategies

Explaining system development life cycle : What is the system development life cycle and what are the best ways to bring social networking to life within this cycle?

User Account

All Pages