At t₀:

- Tesla is trading @ $80; Google is trading @ $101

- 1-year risk free rate is 5%; the 2-year risk free rate is 10%.

- Tesla is going to pay a dividend at t1, but we do not know the dividend.

- Forward price on a 2-year Tesla forward contract is 82.

- Google is going to pay a dividend at t1, but the dividend is unknown.

- The forward price on a 2-year forward contract on Google is 121.

$0 is the cost of a dividend swap at t0, and makes a single payment at t1 of (Tesla Div1 - Google Div1 - SW) if you are long the swap, or - (Tesla Div1 - Google Div1 - SW) if you are short the swap, where SW is the dividend swap price determined at t0.

a)What is SW if there is no arbitrage?

b)If SW is $0.20 greater than in part a. Describe the trades to construct an arbitrage.