Are You Lucky [5]

The current value of equity in the Are You Lucky Gold Mine (AYLGM) is 50. One period from now the stock price will be one of 58.2 or 45.8. The risk free interest rate is 5% per period.

1. Calculate the price of a call option on one AYLGM stock with exercise price 50.

2. What is the forward price for delivery of one AYLGM stock one period from now?

3. If you want to create a portfolio of forward contracts and risk free borrowing and lending that has the same payoffs as the call option with exercise price of 50, what is your position in forwards and risk free borrowing and lending?