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Current price of XYZ mining company stock is AUD 60. The term structure of interest rate (continuously compounded) is 10% p.a. (i) What is the

Current price of XYZ mining company stock is AUD 60. The term structure of interest rate (continuously compounded) is 10% p.a.

(i) What is the six-month forward price (F) of the stock?

(ii) If the six-month call price at strike F is equal to AUD 8 and the six-month put price at strike F is equal to AUD 7, explain why there is an arbitrage opportunity with these prices. Demonstrate the arbitrage scenario.

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