[4] Question 1 [12 marks] (a) State the differences between a forward contract and a call option. (b) Use two diagrams to illustrate the payoffs of longing a forward contract and longing a call option respectively. [4] (c) Briefly describe how does the length of maturity affect the price of the call option and put option respectively. (d) Briefly describe how does the dividend rate affect the price of the call option and put option respectively. [2] [2]