Problem 1.1. An arbitrage free forward contract written on a dividend paying stock which mature at time is values as For ST 1. Prove that For Soel-T is the arbitrage free price by showing if for # Soc. then arbitrage opportunity crist. 2. Show that long and short forward positions can be create synthetically using stocks and cash Problem 1.1. An arbitrage free forward contract written on a dividend paying stock which mature at time T is values as For = Sed 1. Prove that For = Sp{r-byr is the arbitrage free price by showing of Fox # Swee-oy then arbitrage opportunity erist. 2. Show that long and short forward positions can be create synthetically using stocks and cash 3. Explain cash and carry and reverse cash and carry arbitrage strategies with appropriate cramples, charts Suppose 180 days, 8 -0.4.75% and For 50.25 and you are long in forward contracts (to buy the stock). After 90 days (that mean today), you decided you want to close out the forward contract position. Thus enter into another forward contract to sell the stock, which mature in 90 days with current stock price price 45. Assume 365 days per year. (a) What is the second forward contract price (0) What is the combine payoff (both long and short) at maturity (0) What is the present value (as of today) of combine position Problem 1.1. An arbitrage free forward contract written on a dividend paying stock which mature at time is values as For ST 1. Prove that For Soel-T is the arbitrage free price by showing if for # Soc. then arbitrage opportunity crist. 2. Show that long and short forward positions can be create synthetically using stocks and cash Problem 1.1. An arbitrage free forward contract written on a dividend paying stock which mature at time T is values as For = Sed 1. Prove that For = Sp{r-byr is the arbitrage free price by showing of Fox # Swee-oy then arbitrage opportunity erist. 2. Show that long and short forward positions can be create synthetically using stocks and cash 3. Explain cash and carry and reverse cash and carry arbitrage strategies with appropriate cramples, charts Suppose 180 days, 8 -0.4.75% and For 50.25 and you are long in forward contracts (to buy the stock). After 90 days (that mean today), you decided you want to close out the forward contract position. Thus enter into another forward contract to sell the stock, which mature in 90 days with current stock price price 45. Assume 365 days per year. (a) What is the second forward contract price (0) What is the combine payoff (both long and short) at maturity (0) What is the present value (as of today) of combine position