Question I: Suppose you are a market-maker in S&R index forward contracts. The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on the index is 1.5%. (a) What is the no-arbitrage forward price for delivery in 9 months? (b) Suppose a customer wishes to enter a short index futures position. If you take the opposite position, demonstrate how you would hedge your resulting long position using the index and borrowing or lend- ing. (c) Suppose a customer wishes to enter a long index futures position. If you take the opposite position, demonstrate how you would hedge your resulting short position using the index and borrowing or lending