The spot price of an investment asset is$25and the risk-free rate is8%,8.5%and9.5%for one-year-,two-year-and three-year-maturity,respectively.The asset provides an income of$4at the end of the first year and at the end of the second year.

*Note:allinterest rates are quoted with continuous compounding in this problem

#1) What should be the three-year forward price for no arbitrage opportunity?

#2)What is the initial value of this forward contract?

#3)If the 3-year forward price in the market is quoted as$21, what arbitrage opportunities does this create?

#4)How much of the arbitrage profit is realized?

#1 is $23.85

#2 is $0

#3 is long forwardcontract,and short the underlying asset in the spot market &invest $25at risk-free rate

• investPV of$4at8%for1year
• investPV of$4at8.5%for2year s
• investthe remainder($17.93)at9.5%for3years

I need help with #4