Victor Southerland, a risk manager for Barleby LLC, wishes to use the Black model to value a European-style call option on an equity index futures contract. Southerland makes the following observations about the implementation the Black model:

Observation #1:	The Black model incorporates positive mark-to-market cash flows as carry benefits and negative mark-to-market cash flows as carry costs. This is analogous to the treatment of the dividend yield as a carry benefit in the Black-Scholes-Merton model.
Observation #2:	The Black model estimates the value of a European-style call option on a futures contract as a long position in the futures contract and a short position in a risk-free bond (borrowing at the risk-free rate).

Southerland is most likely:

A) correct about both observations.

B) correct about observation 1, but incorrect about observation 2.

C) incorrect about observation 1, but correct about observation 2.

D) incorrect about both observations.