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For each part, provide a short answer ( 3 sentences would be sufficient). (a) The gold futures price is typically greater than the gold spot
For each part, provide a short answer ( 3 sentences would be sufficient). (a) "The gold futures price is typically greater than the gold spot price." Is this statement true or false? Explain why. (b) We can replicate an option by trading S+B. Is this same idea valid for replicating a forward contract? If so, what is " " and what is " B "? and, if not, explain why not. (c) A mutual fund offers the following deal. If you buy the S\&P 500 index, the fund will guarantee that your maximum loss over the next year is $100. But, if the index goes up, you must pay the fund 50% of any gains greater than $100. How would you create this investment opportunity on your own? (d) Which is a riskier investment (i.e., has a greater volatility rate), a deep in-the-money call option or a deep out-of-the-money call option? Why
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