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Ratio of the rate of return on the calls

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Reference no: EM131624285

You have 10,000$ to invest and want to buy 100 shares or 10 call options on the shares. The call option expires in 6 months, has a strike price of 100$ and has a premium of 10$ per share. the stock price is currently 100$. Assume that the stock price rises to 125 by the option expiry date, what is the ratio of the rate of return on the calls over the return on the stock?

a) 1

b) 2

c) 4

d) 6

e) 8

Reference no: EM131624285

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