I was able to answer some of the questions Need help with the others assuming I the first part correctly Company XYZ (Ticker X) is trading at $157 16 per share Suppose the risk free interest rate is 2 at all maturities (annualized, continuously compounded) XYZ is not expected to pay dividends during the next year You are considering a forward contract maturing on October 30, two months from today What is the forward price for delivery of XYZ shares that will preclude arbitrage on the forward contract above S $157 16 R 02 T 2 12 1 6 F Se rt (157 16)e ( 02)(1 6) F $157 68 Suppose the forward price for 2 month delivery of XYZ stock is, instead of the amount you calculated in a, equal to $170 00 per share Is there an arbitrage profit available, what portfolio would you construct to take advantage of this and how much would your profit be Assume no transactions costs Yes there is I would because it is overpriced Enter into a short forward contract Borrow $157 6 for two months at 2 Buy at the spot for $157 16 Cash Flow Source Cash Flow at 0 Cash Flow at T Short the Forward $170 00 Long Spot $157 16 Borrowing $157 16 $157 68 Net Cash Flow $0 00 $12 32 Next, suppose the forward price for 2 month delivery of XYZ stock is $150 00 per share Is there an arbitrage profit available, what portfolio would you construct to take advantage of this and how much would your profit be Assume no transactions costs Yes I would because it is underpriced Enter a long contract Short the share Invest $157 16 for two months at 2 Cash Flow Source Cash Flow at 0 Cash Flow at T Long the Forward $150 00 Short the Spot $157 16 Borrowing $157 16 $157 68 Net Cash Flow $0 00 $7 68 Suppose that, at an earlier date, you had entered into a short forward contract to deliver XYZ shares on October 30 at a delivery price of $155 Based on the forward price you calculated in part a, what is the value now of the forward contract you entered into earlier F price from part A $157 68 Option Strategies There is a two month call option on XYZ with strike price of 155 00 trading at 10 65 a two month put option with strike price of 155 00 is trading at 8 00 Form a synthetic long forward contract with a delivery price of 155 00 using the two options How much does this synthetic long forward contract with delivery price of $375 00 cost you today You could eliminate the risk of the earlier position you took out (short forward at delivery price of $155 00 from part d for delivery two months hence) by either going long a forward contract at the current forward price (your solution in part d) or by going long the synthetic forward contract you constructed in part e Which of these methods would be better for you (cheaper) You dont have to construct all the positions again, just explain

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I was able to answer some of the questions. Need help with the others assuming I the first part correctly.

Company XYZ (Ticker = X) is trading at $157.16 per share. Suppose the risk-free interest rate is 2% at all maturities (annualized, continuously compounded). XYZ is not expected to pay dividends during the next year. You are considering a forward contract maturing on October 30, two months from today.
1. What is the forward price for delivery of XYZ shares that will preclude arbitrage on the forward contract above?

S = $157.16

R = .02

T = 2/12 = 1/6

F = Se^rt

= (157.16)e^(.02)(1/6)

F = $157.68

Suppose the forward price for 2 month delivery of XYZ stock is, instead of the amount you calculated in a, equal to $170.00 per share. Is there an arbitrage profit available, what portfolio would you construct to take advantage of this and how much would your profit be? Assume no transactions costs.

Yes there is I would because it is overpriced:

Next, suppose the forward price for 2 month delivery of XYZ stock is $150.00 per share. Is there an arbitrage profit available, what portfolio would you construct to take advantage of this and how much would your profit be? Assume no transactions costs.

Yes I would because it is underpriced:

Suppose that, at an earlier date, you had entered into a short forward contract to deliver XYZ shares on October 30 at a delivery price of $155. Based on the forward price you calculated in part a, what is the value now of the forward contract you entered into earlier?

F price from part A = $157.68

Option Strategies: There is a two month call option on XYZ with strike price of 155.00 trading at 10.65; a two month put option with strike price of 155.00 is trading at 8.00. Form a synthetic long forward contract with a delivery price of 155.00 using the two options. How much does this synthetic long forward contract with delivery price of $375.00 cost you today?

You could eliminate the risk of the earlier position you took out (short forward at delivery price of $155.00 from part d for delivery two months hence) by either going long a forward contract at the current forward price (your solution in part d) or by going long the synthetic forward contract you constructed in part e. Which of these methods would be better for you (cheaper)? You dont have to construct all the positions again, just explain.