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ch16option_example_i - Chapter 16 Text Example Comparison...

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Chapter 16 Text Example Comparison of Options, Equity and Combined Bills and Options Basic Data for Spreadsheet Current Stock Price $80 Options Price $10 Exercise Price $80 Ending Stock Price T-Bill Rate Annual 4% Ending Stock Price $95 Ending Value Per Option $15 Option 75 80 85 90 95 100 Investment Amount $8,000 Total Ending Value $12,000 0 0 4000 8000 12000 16000 Options Only Strategy Options Purchased 800 Ending Value per Option $15 Stock 75 80 85 90 95 100 Total Ending Value $12,000 Total Ending Value $9,500 7500 8000 8500 9000 9500 10000 Total Profit $4,000 Return on Investment 50.00% Stock Only Strategy Bills & Option 75 80 85 90 95 100 Shares Purchased 100 Total Ending Value $8,640 7140 7140 7640 8140 8640 9140 Total Ending Value $9,500 Total Profit $1,500 Return on Investment 18.75% Option 75 80 85 90 95 100 Bills and Options Strategy Return 50% -100.00% -100.00% -50.00% 0.00% 50.00% 100.00% Number of Options Purchased 100 Investment in Options $1,000 Invesment in Bills $7,000 Ending Value of the Options $1,500 Stock 75 80 85 90 95 100 Ending Value on the Bills $7,140 Return 18.75% -6.25% 0.00% 6.25% 12.50% 18.75% 25.00% Total Ending Value $8,640 Total Profit $640 Return on Investment 8.00% Bill & Option 75 80 85 90 95 100 Return 8.00% -10.75% -10.75% -4.50% 1.75% 8.00% 14.25%
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