Problem 1.1 What is the difference between a long forward position and a short forward position? Problem 1.2 Explain carefully the difference between hedging, speculation, and arbitrage Problem 1.3 What is the difference between entering into a long forward contract when the forward price is $50 and taking a long position in a call option with d strike price of $50? Problem 1.4 Explain carefully the difference between selling a call option and buying a put option. Problem 1.5. An investor enters into a short forward contract to sell 100,000 British pounds for US dollars at an exchange rate of 1.4000 US dollars per pound. How much does the investor gain or lose if the exchange rate at the end of the contract is (a) 1.3900 and (b) 1.4200? Problem 1.6 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? Problem 1.7 Suppose that you write a put contract with a strike price of $40 and an expiration date in three months. The current stock price is $41 and the contract is on 100 shares. What have you committed yourself to? How much could you gain or lose