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(a) Find the replicating portfolio for the forward price of a stock, F(t), when the spot price of the share is $10, the continuously compounded
(a) Find the replicating portfolio for the forward price of a stock, F(t), when the spot price of the share is $10, the continuously compounded interest rate is .05, and the continuously compounded dividend rate is .02. The time interval is one year. Explain the replication process carefully. (b) Show the arbitrage profit when F(t) equals $17. Explain each step carefully.
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