Please answer all questions (ON YOUR OWN), do not leave any question unanswered. Show your calculations.

1.An investor enters into a long forward contract to buy 100,000 British Pounds for U.S. dollar at an exchange rate of $1.70/. How much does the investor gain or loss if the exchange rate at the end of the contract is:

a)$1.68/

b)$1.73/

2.The current stock price of AXT is $29 and you believe that the stock price is going to appreciate for the next three months. A three-month call option with a strike price of $30 is available at $2.90. If you have $5,800 to invest and would like to speculate on the rise of the stock, identify two alternative strategies to invest the $5,800. If the stock price after 3 months is $40, compare the gain from each strategy.

3.A trader enters into a short cotton futures contract when the futures price is 50 cents per pound. The contract is for the delivery of 50,000 pounds. How much does the trader gain or lose if the cotton price at the end of the contract is (a) 48.20 cents per pound (b) 51.30 cents per pound?

4.The current price of a stock is $94, and three-month call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (20 contracts). Both strategies involve an investment of $9,400. What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable?