PLEASE ONLY ANSWER PART B

Consider the following scenarios: a) Suppose that you expect to receive an inheritance of 10,000 in one year. You will want to put this money then on a one-year deposit. Currently, a one-year and twoyear interest rates are 3% and 4.5%, respectively. What forward rate would you expect to receive on your deposit? b) Suppose that you expect to receive an inheritance of 10,000 in one year. You will want to put this money then on a one-year deposit. Suppose further that, as of today, you are entering into a forward rate agreement to receive 4% on 10,000 for a one-year starting in one year. What is your gain/loss when the realised oneyear forward rate in one year is higher/lower than 4% ? Provide one example for each scenario. c) Suppose that the current stock price is 105 per share. The current two-year riskfree interest rate is 4.5%. There are three two-year forward contracts available, with the following two-year forward prices: Given the current stock price and the available forward contracts, can you identify any arbitrage opportunities? If yes, provide two examples. In each case, calculate arbitrage profit and explain how this profit can be earned