3. Stock FD is trading at 1100. The risk-free rate is 5% for all maturities and the stock is expected to pay a dividend of 310 at the end of each quarter. Assume you are at the beginning of the quarter. a. What is the six-month forward price of the stock, assuming interest calculations are on a continuously-compounded basis? b. What transactions will you undertake to exploit the arbitrage, if the futures price is trading higher than your estimate obtained above? Provide the detailed cash flows assuming a higher futures price. 4. Consider the following options for a stock that is currently trading at 105. Strike Call premium Put premium 100 6.30 0.90 105 3.10 2.70 110 1.20 5.80 2 a. Construct a call bear spread based on the above table b. Construct a put bear spread based on the above table c. Do the spreads in the above questions achieve the same objective? Why/Why not? d. Draw the gross and net payoff diagrams corresponding to your answers for (a) and (b) above