Crude oil is currently priced at 50 per barrel. The one-year maturity 53-strike European call and put are trading at 10 and 12, respectively. Assume no carry cost unless otherwise indicated.

(1) Calculate the interest rate. (2) What is the one-year forward price of the crude oil?

(3) Briefly explain the impact on forward price when there is a carry cost every six months.

(4) Now, suppose we replace crude oil by stock XYZ and suppose the investor obtains % of the price of the stock as dividend rate. What is the interest rate now? Suppose = 0.5 + /10, where is the day-of-the-month you were born on.

(5) What is the two-year forward price of one unit of the stock, following (4)?

(6) An investor entered at = 0 the two-year forward contract (as in (5)) to sell one unit of the stock. After one year at = 1, what will be the value of the contract if the stock price falls from 50 to 40? Briefly explain the impact of the falling stock price on the value of the contract.