Question 1. Suppose a stock currently trades at $60. The stock's semi-annual dividend is expected to be $4, paid in 5 months from now. Note that the dividend is paid after the future expires. Assume a 7% Continuously compounded risk-free rate.

Question 2. Calculate the future price of a 3-months future contract on this stock, as implied by the above information.

Question 3. If the fair future price that you calculated above suddenly changed to $59 but all else was unchanged and there was no news about the company, then explain how you could conduct a risk-free arbitrage. Assuming that the future is mis-priced. you're best able to show the step using an arbitrage table. Hint: construct the arbitrage table by having some position in the physical mispriced future above and an offsetting position in a synthetic future. The synthetic future can be constructed using stocks and bonds.