a) An investor has just taken a short position in a 9-month crude oil forward contract. The oil price today is 50 per barrel, and the risk-free rate of interest is 7% per annum with continuous compounding. Storage costs of 2.5 are paid at the end of 3 and 6 months, respectively. i. What is the price and the initial value of the forward contract? (7 marks) ii. If the futures price in the market is 60 what arbitrage opportunities does this create? Show all the calculations. (10 marks) iii. What value of the storage cost would prevent arbitrage opportunities? (8 marks) b) Why is an American call option on a dividend-paying stock is always worth at least as much as its intrinsic value. Is the same true of a European call option? Explain your answer. (15 marks) c) Briefly discuss the differences between exchange-based and OTC trading (10 marks)