Suppose you think WW stock is going to appreciate substantially in value over the next six months. The stock's current price is $30 and the call option expiring in six months has an exercise price, X, of $35 and is selling at a premium (option price), C, of $12. You invest $12,000 on 1,000 options (10 contracts, each for 100 shares). What is the rate of return if the stock price six months from now is $50? Show your work.

Suppose you think WW stock is going to appreciate substantially in value over the next six months. The stock's current price is $30 and the call option expiring in six months has an exercise price, X, of $35 and is selling at a premium (option price), C, of $12. You invest $12,000 on 1,000 options (10 contracts, each for 100 shares). What is the rate of return if the stock price six months from now is $50? Show your work.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...

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