1) Consider a long forward contract to purchase a coupon-bearing bond whose current price is $960. The forward contract matures in 8 months and a coupon payment of $50 is expected in 2 months. The continuously compounded risk-free interest rate is 5% per annum. Suppose that the forward price is $955. 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 3% and 4% (continuously compounded). The spot exchange rate between the euro (EUR) and the US dollar (USD) is 1.15 USD per EUR. Suppose that the 1-year forward exchange rate is 1.1550. How can an arbitrageur generate arbitrage profits? Explain in detail. 3) A stock is expected to pay a dividend ofs2 per share in three months and in six months. The stock price is $60, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in an eight-month forward contract on the stock. a. What are the forward price and the initial value of the forward contract? b. Five months later, the price of the stock is $56 and the risk-free rate of interest is still 8% per annum. What are the forward price and the value of the long position in the forward contract