You are dealing with two stocks: Stock 1 and Stock 2 . You have the following information about these two stocks: 1=1.52=0.25oneyearrf=2E(rm)=10% You also know that both stocks currently trade at 10. Assume that Stock 1 pays 1% dividend yield p.a., whereas Stock 2 pays no dividend. Assume that you will use the CAPM model. a) Calculate the expected return on both stocks. b) Calculate the one-year forward price for the two stocks. c) Following your calculations in parts (a) and (b), do you think there is an opportunity for arbitrage? Why? Explain. You are dealing with two stocks: Stock 1 and Stock 2 . You have the following information about these two stocks: 1=1.52=0.25oneyearrf=2E(rm)=10% You also know that both stocks currently trade at 10. Assume that Stock 1 pays 1% dividend yield p.a., whereas Stock 2 pays no dividend. Assume that you will use the CAPM model. a) Calculate the expected return on both stocks. b) Calculate the one-year forward price for the two stocks. c) Following your calculations in parts (a) and (b), do you think there is an opportunity for arbitrage? Why? Explain