Question: 7. Futures options Suppose Larry expects interest rates to decrease and purchases a call option on Treasury bill futures from Megan. The exercise price on

7. Futures options

Suppose Larry expects interest rates to decrease and purchases a call option on Treasury bill futures from Megan. The exercise price on Treasury bill futures is 89-00. The call option is purchased at a premium of 3-00. Assume that interest rates do decline and, as a result, the price of the Treasury bill futures contract increases over time to a value of 97-00 shortly before the options expiration date. If Larry decides to exercise the option, his profit will be.

The profit that Megan will make will be.

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