A Futures Price Is Currently 40 Cents

question 6

Short Answer

A futures price is currently 40 cents. It is expected to move up to 44 cents or down to 34 cents in the next six months. The risk-free interest rate is 6% with continuous compounding.
i) What is the probability of an up movement in a risk-neutral world? _ _ _ _ _ _
ii) What is the value of a six-month put option with a strike price of 37 cents? Give two decimal places.) _ _ _ _ _ _
iii) What is the value of a six-month call with a strike price of 33 cents? Give two decimal places.) _ _ _ _ _ _

---

Definitions:

Coastline

The coastline is the area where land meets the sea, characterized by its shape and features influenced by various geological processes.

Shoreline

The boundary line between land and a body of water.

Waves

Oscillations that travel through water caused by the wind on the surface, resulting in a rise and fall motion.

Tides

Regular, periodic variations in the sea level caused by the gravitational pull of the moon and sun on Earth's oceans.