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Consider a 3-month European Call opton. K(strike)=50, interest rate = 8.2% per annum. St(stock price)=55 a) Suppose you write a new forward contract with the

Consider a 3-month European Call opton. K(strike)=50, interest rate = 8.2% per annum. St(stock price)=55

a) Suppose you write a new forward contract with the maturity which is identical to that of the opton. What is the forward price?

b) Suppose that the option price = 4. Show how an arbitrage using a new forward contract(delivery price equals to the forward price)

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