Question: Can someone please answer this problem in its entirety and show how you got the answer? MDLZ stock sells at $45.20 and is expected to

Can someone please answer this problem in its entirety and show how you got the answer?

MDLZ stock sells at $45.20 and is expected to pay dividends of $.17 in 3, 6, 9 and 12 months respectively. The risk-free rate is 4% per annum continuously compounded for all maturities. We consider the 1-year futures contract on MDLZ.

(a) What is the theoretical 1-year futures price? (2 marks)

(b) The 1-year futures market price is $49. Is there an arbitrage? If so, how can we benefit from it? Show all details. (3 marks)

(c) Based on the futures market price in part (b), what is the value of a short futures contract on MDLZ 6 months from now if the futures price in 6 months is 46$? (1 mark)

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