Question 5 (4 points) The S&R index spot price is 1200, the continuously compounded annual risk-free rate is 6%, and the continuous dividend yield on the index is 0. Suppose you observe 9-month forward price of 1245. What arbitrage would you undertake and what is the resulting arbitrage profit? (Hint: Compare the no arbitrage forward price and the market forward price given to make your conclusion. Alternatively, you can use the payoffs to a "cash-and-carry" and a "reverse cash-and-carry" to make your conclusion.) You will engage in a reverse cash-and-carry arbitrage, and the resulting arbitrage profit is $45. You will engage in a cash-and-carry arbitrage, and the resulting arbitrage profit is $45. You will engage in a cash-and-carry arbitrage, and the resulting arbitrage profit is $10.23 You will engage in a reverse cash-and-carry arbitrage, and the resulting arbitrage profit is $10.23 Question 6 (4 points) Suppose the stock price is $45 and the continuously compounded annual interest rate is 9%. If the 3-month forward price is $46, what is the annualized forward premium? 8.79% 4.40% 6.59% 2.20%