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Suppose that the risk-free interest rate is 10%. A bond with 8% yield is traded at a price. The current bond price is $100. (a)

Suppose that the risk-free interest rate is 10%. A bond with 8% yield is traded at a price. The current bond price is $100.

(a) Calculate the theoretical future price for the contract deliverable in six months.

(b) If the actual future price for this stock is $102, describe the arbitrage opportunity and calculate the profit that you can realize.

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