1. A six month long forward contract on a stock is available. The stock price is $100 and the risk free rate is 10%. The stock will pay a dividend of $5 in six months, just before the contract matures. (20 pts)

1. What is the fair price of the forward (per share)?

2. Assume the actual forward price is $115 per share. Demonstrate how you could profit from an arbitrage trade. Size your trade to a forward on one share, show all transactions you would make and give their cash flows now and at maturity. Most importantly, how much is your arbitrage profit?

Transaction	Now	Expiration
Net