Find the price of a European call on a futures if the futures price is $106,the exercise price is $100,the continuously compounded risk-free rate is 7.2 percent,the volatility is .41 and the call expires in six months.
A)$14.57
B)$17.04
C)$6.00
D)$19.78
E)none of the above

Question

Quizplus · Accepted Answer

The price of a European call option on a futures contract can be calculated using the Black-Scholes formula for futures options. Given the inputs: futures price = $106, exercise price = $100, risk-free rate = 7.2%, volatility = 0.41, and time to expiration = 0.5 years, the calculated call price is approximately $14.57.

Find the Price of a European Call on a Futures