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i. Find the replicating portfolio for the forward contract on a stock, F(t), when the spot price of the share is $20, the continuously compounded interest rate is .12, and the continuously compounded dividend rate is .04. The time interval is one year. Explain the replication process carefully. ii. Show the arbitrage profit when the forward rate, Flt), equals $15 in the market. Explain each step carefully. 4. Graphically show each of the following effects in the money market: a. Graphically show the effect on the money market when the FOMC sells bonds b. Graphically show the effect on the money market when the Federal Funds Rate rises c. Graphically show the effect on the money market when the price level in society rises d. Graphically show the effect on the money market when Fed engages in quantitative easing. e. Graphically show the effect on the money market when consumption is fallingQT. Your rate of return expectations for Stock A and Stock B during the next year are: STOCK A Possible Rate of Return Probability 0.10 0.25 0.00 0.15 0.10 0.35 0.25 0.25 STOCK B Possible Rate of Return Probability 0.60 0.15 0.30 0.10 0.10 0.05 0.20 0.40 0.40 0.20 0.80 0.10 (a) Compute the expected return [EfR] on this investment, the variance of this return (o2), and its standard deviation (o). (b) Under what conditions can the standard deviation be used to measure the relative risk of two investments? (c) Under what conditions must the coefcient of variation be used to measure the relative risk of two investments