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Dec 2008 attempt
Using the options on futures , if we select the best exercise price, then it should be 94.25.
So why exercise price of 94 has been selected.??This is a bad question to practice on – it was set by the previous examiner (not the current examiner) and some of his questions (including this one) were dreadful (which is why he is not the current examiner 🙂 )
There is no such thing as a ‘best’ exercise price to choose – some will fix a lower maximum but at the same time will cost more.
However there is no special reason for choosing a price of 94 – you could have proved that you understood options by choosing any exercise price.
I wasted an hour trying to figure out why has he chosen a price of 94 then i googled it and came to that post.
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