BrotGut, a bakery chain which bakes and distributes bread to the Sydney market, is concerned about the impact of the war in the Ukraine on its manufacturing costs. BrotGut is worried that the price of wheat could rise sharply. As a result of its concerns, BrotGut is considering entering into a European call option contract with a strike price of $420 per metric tonne. BrotGuts financial modelling team have studied wheat prices and have come to the conclusion that over the next three months the price of wheat could rise by a third if the war in the Ukraine continues (occurring with probability p = 0.95) or fall by 25% (= 11/1.333, occuring with probability 1 p = 0.05) if the war ends. The current price per metric tonne of wheat is $400. BrotGut can borrow money today for any period under six months at a rate of j12 = 4% p.a.

Use the contingent payments method to find the amount BrotGut would be willing to pay today (i.e., the option premium) for the call option. Round your answer to five decimal places. a. $103.525 64 b. $106.242 99 c. $106.597 14 d. $106.600 66