You work for Goldman Sachs who is the lead underwriter of Firm T's IPO. You need to set up the contract and Firm T has agreed to any of the two following contracts:

Contract A: $20 mill and a green provision of 15% (which matures in 1 day)

Contract B: $21mill

Contract C: $19mill +1% of the IPO price

You have estimated the price of Firm T to be 70mill and this is the IPO price. The daily volatility on the IPO day is around 40%. The risk-free rate is 0%. Use Black-Scholes to choose one contract.

Group of answer choices

A. Contract B

B. You are indifferent

C. Contract C

D. Contract A