1.The current price of Facebook stock(Ticker:FB) IS 75.10/Share.Suppose the risk free rate is currently 2.4% at all maturities.FB does not pay a dividend and there is no expectation that it will anytime over the coming year.Consider a 7-month forward contract on FB(maturing in June).What is the forward price that would preclude arbitrage on such a forward contract?

(b)If the 7 month forward price on FB was $77.50, is there an arbitrage opportunity?If so, how would you exploit it?

(c)Suppose you had a long position in a forward contract on FB with F = $77.50/share(expiring in June), and by the time you get to May(one month remaining on the contract), FB's price has risen to $79.93. What is the value of your long contract?What would be the value of an analogous contract?

2.Now consider call and put options on FB expiring in June with strikes of K = 77.00(Kput = Kcall = 77.00). What is the largest lower bound on price of a call option on FB with K = 77.00 and T = June? What about the comparable put option?