Answer True or False (T/F) for the following questions

a) A stock is trading at $150. A call option on the stock with a maturity of three months is trading at $9.30 and has a delta of 0.45. If the stock price increases to $159, the new call price will be more than $13.35.

b) The spot market price of premium grade palm oil is $50 per liter. A futures contract on 100,000 liters with settlement in 1 year is currently priced at $55.50 per liter. The one-year interest rate is 8% p.a. (continuously compounded) and it costs $0.70 per liter per year (payable at the beginning of each year) to store palm oil. You can make riskless arbitrage profit of $58,000 (to the nearest dollar) by buying 100,000 liters of physical palm oil, storing it and selling one futures contract.

c) In Black-Scholes option pricing model, the stock prices follow a normal distribution while the stock returns follow a log-normal distribution.

d) The Black-Scholes option pricing formula cannot be used to price European index options.

e) By shorting corn futures, corn farmers cannot hedge against the risk of adverse weather wiping out their crop.