Please state whether the following statements are true or false. Explain your answer briefly (in no more than four sentences).

1. Suppose a companys earnings next year will be 100, the expected earnings growth rate is 3% per year, the return on equity (ROE) is 5%, and the discount rate is 8% per year. According to the Gordon growth model, the companys current stock price must be 2000.

2. XYZ stock is selling at 20. A 1-year forward on the stock is being offered at 21. The annual risk-free rate is 4%. There is an arbitrage opportunity.

3. If a companys return on equity (ROE) is greater than the discount rate R, it is in the shareholders interest to retain the earnings in the company.