1. Consider a market with a risky asset S, in which people can invest money in the bank at rate ra per year and borrow money from the bank at rate rb per year, with rb > ra (both interest rates are continuously compounded). You have to prove that in this market there exists an interval of one-year forward prices on the stock such that there are no arbitrage opportunities, instead of a single price. Denote by So the initial price of the stock. (a) (5 pts) If S pays no dividends, construct an arbitrage opportunity when F(0) > Soe" and when F(0)