The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,300. Exercise Expiration Date April 2018 Price Call Price $132.70 Put Price $ 31.10 $1,200 1,300 73.20 70.10 1,400 33.00 134.20 $ 53.55 $1,200 1,300 July 2018 $161.70 104.00 96.00 1,400 $1,200 1,300 62.55 $210.00 155.35 156.05 $ 88.05 133.25 January 2019 1,400 112.00 190.00 Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,300 x 1.20 = $1,560.00 or fall to $1,300/1.20 = $1,083.33. a. What would be your percentage return on a January expiration call option with an exercise price of $1,300 if the stock price rose? (Round your answer to 2 decimal places.) b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.) c. Which is riskier: the stock or the option? Percentage return % a. b. Percentage return % с. Which is riskier: the stock or the option?
The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,300. Exercise Expiration Date April 2018 Price Call Price $132.70 Put Price $ 31.10 $1,200 1,300 73.20 70.10 1,400 33.00 134.20 $ 53.55 $1,200 1,300 July 2018 $161.70 104.00 96.00 1,400 $1,200 1,300 62.55 $210.00 155.35 156.05 $ 88.05 133.25 January 2019 1,400 112.00 190.00 Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,300 x 1.20 = $1,560.00 or fall to $1,300/1.20 = $1,083.33. a. What would be your percentage return on a January expiration call option with an exercise price of $1,300 if the stock price rose? (Round your answer to 2 decimal places.) b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.) c. Which is riskier: the stock or the option? Percentage return % a. b. Percentage return % с. Which is riskier: the stock or the option?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,300.
Exercise
Expiration Date
April 2018
Price
Call Price
$132.70
73.20
33.00
$161.70
Put Price
$1,200
$ 31.10
70.10
134.20
$ 53.55
1,300
1,400
$1,200
1,300
1,400
$1,200
1,300
1,400
July 2018
104.00
96.00
62.55
156.05
January 2019
$210.00
$ 88.05
155.35
133.25
112.00
190.00
Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,300 × 1.20 = $1,560.00 or fall to
$1,300/1.20 = $1,083.33.
a. What would be your percentage return on a January expiration call option with an exercise price of $1,300 if the stock price
rose? (Round your answer to 2 decimal places.)
b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.)
c. Which is riskier: the stock or the option?
Percentage return
%
а.
b.
Percentage return
%
c.
Which is riskier: the stock or the option?
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