Suppose that there is a forward contract on a non - dividend paying stock. The spot price of the stock is $80, and it would be either $85 or $78 in the next time period. The forward price is $83. The risk - free interest rate is constant at 5%.

a) What is the value of the forward contract?

b) Given the answer to (a), is there an arbitrage opportunity available?

c) If there is an arbitrage opportunity, provide a strategy to exploit the arbitrage.