What are the correct arbitrage strategy

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Question - Consider a one-year forward contract on a dividend-paying stock. The current stock price is $100 and the risk-free rate of interest is 10 percent per annum. The stock will pay a dividend of $5 per share in six months. If the forward price is 108, is there an arbitrage opportunity? If so, what are the correct arbitrage strategy and the arbitrage profit? For the arbitrage strategy, show the cash flows from each transaction and the resulting net cash flows.

Reference no: EM133116174

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