1) Consider a long forward contract to purchase a coupon-bearing bond whose current price is $920. The forward contract matures in 5 months and a coupon payment of $40 is expected in 3 months. The continuously compounded risk-free interest rate is 6% per annum. Suppose that the forward price is $910. How can an arbitrageur generate arbitrage profits? Explain in detail. 2) Suppose that the 1-year interest rates in Germany and the United States are 2% and 3.5% (continuously compounded). The spot exchange rate between the euro (EUR) and the US dollar (USD) is 1.2000 USD per EUR. Suppose that the 1-year forward exchange rate is 1.2100 USD per EUR. How can an arbitrageur generate arbitrage profits? Explain in detail. 3) A stock is expected to pay a dividend of $1.5 per share in two months and also in five months. The stock price is $50, and the risk-free rate of interest is 7% per annum with continuous compounding for all maturities. An investor has just taken a long position in a seven-month forward contract on the stock. a. What are the forward price and the initial value of the forward contract? b. Three months later, the price of the stock is $54 and the risk-free rate of interest is still 7% per annum. What are the forward price and the value of the long position in the forward contract