The S&R index level is 1200 at t=0. The risk-free rate is 6% continuously compounded. Suppose you observe a forward price with a maturity of 6 months equal to 1230.

(a) What is the implied dividend yield?

(b) If you believe the actual dividend yield is 2% p.a., what position do you take in order to earn arbitrage profit?

A. Long stock and short forward

B. Long stock and long forward

C. Short stock and long forward

D. Short stock and short forward

(c) If you believe the actual dividend yield is 2% p.a., in the arbitrage, how many shares of stock would you long/short when you take 1 forward position at t=0?