Question 3 (8 marks)

a. A FXB call option sells for $3.5. It has a strike price of $40 and three months until expiration. If the FXB stock sells for $37 per share, what is the price of a FXB put option with a $40 strike price and three months until expiration? The risk-free interest rate is 5% per year.

b. An investor sells four July futures contracts on orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is $1.203 per pound. The initial margin is $5,000 per contract and the maintenance margin is $3,500 per contract. What is the futures price per pound that would lead to a margin call?