(a) Use putcall parity to relate the initial investment for a bull spread created using calls to the initial investment for a bull spread created using puts. [28 Marks]

(b) How can a forward contract on a stock with a particular delivery price and delivery date be created from options?

[18 Marks]

(c) Explain what is a covered call and what is the intuition behind this strategy. You should include a graphical illustration in your answer showing the profit pattern from this strategy. What position in put options is equivalent to a covered call and why? [18 Marks]

(d) Provide a full derivation of a one-step binominal option pricing model. [36 Marks]