The annualized continuously compounded rate of return

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Please use a spreadsheet to evaluate the following two investment strategies: 1) investing in a stock alone, and 2) investing in a stock and writing a 15-month European call option on the stock. The current stock price is $35, the risk-free interest rate is 2.1% p.a. (continuous compounding), and the volatility of the stock is 27%. Calculate the annualized continuously compounded rate of return for each future stock price in the range of $15 to $55 with a $2 interval (i.e., $15, $17, $19, ..., and $55). Create three spreadsheets, each for an exercise price of $30, $35, and $40 respectively. What insights can you derive from the results? What if the exercise price is $15?

Reference no: EM131904351

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