JTM pays its C-suite officers with stock options. Treasury asked you to price them. JTM's stock trades at $11.25/share; U.S. Treasurys, aka the risk-free rate, yield 1.97% and stock's volatility is 18%. The details of the stock option offers are below. What are the prices of the options? Exercise Price Maturity (yrs.) CEO 22.00 7.0 CFO 21.00 5.0 CIO 20.00 3.0 B. JTM's treasury unit bought jet fuel futures to hedge its expenses. It uses 9.5M gallon/yr. Each contract runs 42,000 gallons. The contract price locked JTM at $1.6355/gal. At maturity, JTM found that the spot price was $1.6210/gal. In effect, had they not taken the futures, they'd have paidless. What was the loss on the contract? Exercise Price Maturity Stock price Risk free rate Volatility BS calculations: dl N(dl) d2 N(42) Price of call A. Option Pricing CEQ A A A A A A A A A A CFO A A A A CIO B. Futures Prices Gallons Gallons/contract # of contracts Contract price Spot price Profit/(Loss) 9500,000 42,000 1.6355 1.6210