Question

•IBM stock price = $100 •Price of IBM call (exercise price = $100) and expiring in...

•IBM stock price = $100

•Price of IBM call (exercise price = $100) and expiring in two months = $2/share

• Alternative Investments

• A. Buy 100 shares of IBM: 100 x $100 = $10,000

• B. Buy 1 IBM call contract: 100 x $2   = $ 200

Suppose IBM stock rises to $120/share by expiration day for the call.

what is the return on the shares, and what is the return on the call?

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