1.1 Consider a stock whose price on 1 February 2015 is R315 and which will pay a dividend of R2 on 01 July 2015.The interest rate is 18%. Is there an arbitrage opportunity if on 01 February 2015 the forward price for delivery of the stock on 01 November 2015 is R 360? If so, compute the arbitrage profit

1.2 Let the arbitrage free 3- monthz futures price for wheat be denoted by Ft. Suppose it costs c-rand(Rc) to store 1 ton(907.18 kg) of wheat for 12 months and s-rands per year to insure the same quantity. The interest rate applicable to traders of spot wheat is r%. Finally assume that the wheat has no convenience yield.

A) obtain a formula for Ft

B) let Ft=1500, s=R100. 00, c=R150.00 and the spot price of wheat be St=1470. Is this Ft arbitrage free?

C) Assuming that all the parameters of the problem remain the same, what would be the profit or loss of an arbitrage portfolio at expiration?