1) Suppose that there are futures (F(t,1)) and forwards (F(t, 1)) contracts maturing in 1-year for the underlying S. Consider the two strategies: i) Buy e" forwards today (forward price = F(0,1)). Buy e"/260 futures today (futures price = f(0,1)). . On day i be long eli+1)9/200 futures. a) What is the payoff of strategy 1? b) What about strategy 2? c) Compare the payoffs. d) If interest rates are constant, is there an arbitrage opportunity? Describe it. Note: Assume that there are 260 business days in a year and that the yield curve is flat at r (with continuous compounding). 1) Suppose that there are futures (F(t,1)) and forwards (F(t, 1)) contracts maturing in 1-year for the underlying S. Consider the two strategies: i) Buy e" forwards today (forward price = F(0,1)). Buy e"/260 futures today (futures price = f(0,1)). . On day i be long eli+1)9/200 futures. a) What is the payoff of strategy 1? b) What about strategy 2? c) Compare the payoffs. d) If interest rates are constant, is there an arbitrage opportunity? Describe it. Note: Assume that there are 260 business days in a year and that the yield curve is flat at r (with continuous compounding)