A Three-Month At-The-Money Call Option on a Stock Index Is

Multiple Choice

A three-month at-the-money call option on a stock index is trading at $5; the index is trading at $50. A forward start option on the index that comes to life in one month, has a life of three months from that point and that will be at-the-money when it comes to life, is trading at $4.98. The one-month rate of interest is 2% in continuously-compounded and annualized terms. What is the one-month forward price of the index?

A) $50.00
B) $50.05
C) $50.25
D) $50.45