a.How can a forward contract on a stock with a particular delivery price and delivery date be created from options?(30 marks)

b.It is July 2016. A mining company has just discovered a small deposit of gold. It will take six months to construct the mine. The gold will then be extracted on a more or less continuous basis for one year. Futures contracts on gold are available on the New York Mercantile Exchange. There are delivery months every two months from August 2016 to December 2017. Each contract is for the delivery of 100 ounces. Discuss how the mining company might use futures markets for hedging.(40 marks)

c.Suppose you own 5,000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months?(30 marks)