To: Professor Baker

From: Stephen Panetta, John Michael Croft, & Rebecca Thompson

Date: 4/22/09

Re: Apple Inc. Stock (AAPL)

As requested, we have performed an analysis on predicted stock price for Apple Inc. (AAPL). Additionally, we have reviewed the three investment strategies you submitted to us and have provided advice so that you may select the best one to fit your needs. Our analysis was conducted under the assumption that the risk free rate is .57%. Additionally, our analysis utilizes historical data and is based on past performance, which does not guarantee future results.

After conducting our analysis, we have determined the following price predictions for Apple Inc. stock (AAPL).

In regards to the strategies you have provided for review, Table 1 summarizes the expected percentage return and value of your holdings at the end of one-year for each, as well as a best and worse case scenario and standard deviation. Since we predict Apple Inc. stock will continue to increase in value, the best strategy to follow to provide you with the highest anticipated rate of return would be strategy one, simply owning the stock. If you are, however, somewhat more risk averse you could follow strategy 2 and insure half of your long position in Apple stock by buying put contracts. This strategy will slightly lower your return but will also lower your risk. I do not recommend Strategy 3 as it is only expected to provide slightly less than the risk free rate of return yet at the cost of incurring much risk. If you have any questions or comments about our analysis of AAPL or any of the strategies considered, please contact us.

Table 1Minimum Mean Maximum Std. Deviation

Strategy 1 % Return (82.93%) 6.13% 502.91% 61.92%Ending Holdings $1,855 $11,535 $65,531 $6,730Strategy 2 % Return (44.19%) 5.49% 355.79% 46.85%Ending Holdings $6,806 $12,864 $55,582 $5,713Strategy 3 % Return (433.19%) 0.51% 233.20% 168.55%Ending Holdings $(250) $75.41 $250 $126

Stock Prices for AAPLCurrent Price = $108.69 (4/1/09) Predicted Price Volatility (Std. Dev)

In One Month $109.25 17.26%In Six Month $111.99 44.55%In One Year $115.32 66.91%