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A forward contract on a non-dividend paying stock trades at 1,200. This forward contract matures 1 month from now. A second forward contract on the

A forward contract on a non-dividend paying stock trades at 1,200. This forward contract matures 1 month from now. A second forward contract on the same stock trades at 1,220 and expires 3 months from now. Suppose perfect market and a continuously compounding interest rate which will remain same over the next 6 months.

1. What is the spot price of the underlying asset today?

2. Now, suppose there is a third forward contract, expiring in 4 months and trading at 1,250. Is there an arbitrage opportunity? If so, how could you exploit this opportunity?

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