Question: a future contract on a share,which pays dividend at a continously compounded rate of 3% is written when the share has a price of $790,

a future contract on a share,which pays dividend at a continously compounded rate of 3% is written when the share has a price of $790, and the continously compounded risk-free interest rate is 5% the contract is priced at $800 and expires in 3 months.

a) what should have been the futures price?

b) demonstate how you could execute an arbitrage transaction and calculate arbitrage profit.

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