A single-stock futures contract on a stock with current price $150 has a maturity of 1 year. The stock is expected to pay no dividends. Suppose that the T-bill (risk-free) rate is 4%.

1. What should the futures price be?

2. Does the futures price change if the maturity of the contract is 4 years?

3. Suppose that the interest rate is instead 7% and the maturity of the futures contractis 4 years. The futures price is is $194.32. Is there is an arbitrage opportunity? If so, construct a trading strategy to exploit the arbitrage.