The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%.

1.What is the value of long futures contract (per share) at the option maturity? (1 mark)

2.To price a futures call option, we construct a risk-free portfolio including a long position consisting of delta shares of futures and a short position on one call futures option. Please solve for delta. (2 marks)

3.What is the value of the risk-free portfolio at the maturity? (1 mark)

4.What is the value of the risk-free portfolio at time zero? (1 mark)