820 Document24 Home Insert Draw Design Layout References Mailings Review View Tell me Share Com Cabrio 12 AA ASA A2A- All Abeced Poste X Styles Dette Pere Sere Editor ... . EXTE E A A stock is expected to pay a dividend of $1 per share in 2 months and again in 5 months. The stock price is $140 and the risk-free rate of interest is 3% per annum with continuous compounding for all maturities. An investor has just taken a long position in a 3-month forward contract on the stock. (a) What are the futures price and initial value of the contract? (b) Two months later, the price of the stock is $125 and the risk-free rate is still 2% per annum. What are the futures price and the value for long position in the futures contract? (c) Suppose the futures market quote for this contract in two months is $127 and the arbitrage trading costs are $1. Is there is an arbitrage opportunity? If yes, briefly describe the arbitrage trades and cash flows. 25 points