How much is the option worth

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Reference no: EM131241243

A company can buy an option for the delivery of 1 million units of a commodity in 3 years at $25 per unit. The 3-year futures price is $24.

The risk-free interest rate is 5% per annum with continuous compounding and the volatility of the futures price is 20% per annum. How much is the option worth?

Reference no: EM131241243

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