Consider a forward contract on 1000 shares of SGAIR stock with maturity in exactly one year from now. Today the spot price for one share of SGAIR is $12 and the continuously compounded risk-free interest rate is 3% p.a. In 9 months from now, SGAIR will pay a dividend of $0.15 per share.

(a) What is the no-arbitrage forward price for this contract?

(b) Assume in this question only that the forward contract trades at a forward price of $1,218. Formulate an arbitrage strategy. Show the arbitrage profit of the proposed strategy.

c)Suppose that one year ago you entered in a long position into this contract (which was then a two-year contract) at a forward price of $1,200 and that today you close your position at the no-arbitrage price you computed in part (a). What is the profit you earn today by closing your position?