Question 5: (For this question, please take a photo or image of your handwritten solution and place it in an Excel spreadsheet for upload.) Consider a contract to purchase an underlying asset, S, at a future time, T, for a fixed price X, which is not the prevailing fair forward price. Let the current price of the underlying be So, the future price be ST, and denote the discount factor prevailing between 0 and T as d(0, T). (a) If there are no forward contracts on the underlying available to trade, use an arbitrage or repli- cation argument to derive the current price of this contract (at inception) in terms of So, d(0,T) and X (Please note that the final answer is only worth 1 mark, whereas the derivation is worth 3.) (b) If there are forward contracts on the underlying available to trade (both long and short and with maturity T), with fair forward price F, use an arbitrage or replication argument to derive the current price of the contract (at inception) in terms of F, X and d(0,T). (Please note that the final answer is only worth 1 mark, whereas the derivation is worth 3.) (8 marks) Question 5: (For this question, please take a photo or image of your handwritten solution and place it in an Excel spreadsheet for upload.) Consider a contract to purchase an underlying asset, S, at a future time, T, for a fixed price X, which is not the prevailing fair forward price. Let the current price of the underlying be So, the future price be ST, and denote the discount factor prevailing between 0 and T as d(0, T). (a) If there are no forward contracts on the underlying available to trade, use an arbitrage or repli- cation argument to derive the current price of this contract (at inception) in terms of So, d(0,T) and X (Please note that the final answer is only worth 1 mark, whereas the derivation is worth 3.) (b) If there are forward contracts on the underlying available to trade (both long and short and with maturity T), with fair forward price F, use an arbitrage or replication argument to derive the current price of the contract (at inception) in terms of F, X and d(0,T). (Please note that the final answer is only worth 1 mark, whereas the derivation is worth 3.) (8 marks)