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There is a forward contract on stock XYZ. Currently, the spot price of stock XYX is HK$25 per share and it is known that the

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There is a forward contract on stock XYZ. Currently, the spot price of stock XYX is HK$25 per share and it is known that the stock XYZ will pay a dividend of HK$2 per share in 9 months. Suppose that the risk free rate is always 1.5% per annum with continuous compounding. Assume that short selling of stock XYZ is possible and causes no fee. (a) What is the 1-year forward price? (b) If the 1-year forward price is HKS23, what is the arbitrage opportunity

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