the price of the stock xy is $80. the risk free rate of interest, compounded annually is 5%. The one year forward price for the stock is $85.

a) calculate the no arbitrage one year forward price for stock XY

b) describe the arbitrage opportunity that exists. List the positions that an investor would need to take in order to exploit this arbitrage opportunity.

c) calculate the arbitrage profit to an investor at the beginning of the year, assuming that the net cash flow for the investor is positive at time 0, and 0 at time one.