Question 2 [Forward and Spot Prices: 30%] Assume that the underlying asset/stock is an investment asset. The information of the forward price and stock price is provided below: Forward price F0 $450 Stock/Spot Price S0 $430 Maturity date of Forward Contract (1 year) T 1 Risk-free Rate r 4% Question 2 - Part A [10%] Given the above information, show that there is an Arbitrage Opportunity between the Forward price and the Spot price. Question 2 - Part B [20%] Construct and demonstrate the Arbitrage Strategy (i.e., Cash-and-Carry Strategy or Reverse Cash-and-Carry Strategy) based on the above information and your result in Part (A). In addition, compute the Arbitrage Profit of this arbitrage strategy.

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Part A B Cashandcarryarbitrage is a market neutral strategy combining the purchase of a long positio... View the full answer