This is taken from example 1 of the study notes. A forward contract is priced at $65. European call options on the forward contract have an exercise price of $70 and expire in 180 days. The continuously compounded risk-free rate is 5.25% and volatility is 0.17. We have calculated the N(d₁) = 0.2877 and N(d₂) = 0.2483. The Black model can be used to value the call options by calculating the present value of the difference between the futures price and the exercise price. The futures price should be adjusted by ______.

A. 0.2877
B. 0.2483
C. 0.7123

Correct Answer: A

For call options, the futures price should be adjusted by N(d₁).