Course Solutions Uncategorized (Answered) : Problem 2 Stock Market Investor 500 Spend Considering Pur Chasing Option Contract 1 000 Sh Q31764731

(Answered) : Problem 2 Stock Market Investor 500 Spend Considering Pur Chasing Option Contract 1 000 Sh Q31764731

Help me on decision analysis

Problem #2: A stock market investor has $500 to spend and is considering pur- chasing an option contract on 1,000 shares of Apricot Computer. The shares themselves are currently selling for $28.50 per share. Apricot is involved in a lawsuit, the outcome of which will be known within a month. If the outcome is in Apricots favor, analysts expect Apricots stock price to increase by $5 per share. If the outcome is unfavorable, the price is expected to drop by $2.75 per share. The option costs S500, and owning the option would allow the investor 

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