A company called Atlantic exists and has a current stock price of $25 per share. Suppose you have $1,000 to invest and consider these two possibilities; (1) use all $1,000 to buy shares in Atlantic long, or (2) use all $1,000 to buy call options on Atlantic with a strike price of $25 and a premium of $5. Which of the following is TRUE if just prior to expiration of the call options the price of Atlantic rises to $30? Assume that with possibility (1) you sell all your shares at $30.
a. (1) provides a return of 5% while (2) provides a return of -100%
b. (1) provides a return of 20% while (2) provides a return of 50%
c. (1) provides a return of 20% while (2) provides a return of -100%
d. (1) provides a return of 20% while (2) provides a return of 0%
e. (1) provides a return of 5% while (2) provides a return of 50%