Compute the arbitrage profit

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Question: Consider a stock whose price on 1 January is $120 and which will pay a dividend of $1 on 1 July 2000 and $2 on 1 October 2000. The interest rate is 12%. Is there an arbitrage opportunity if on 1 January 2000 the forward price for delivery of the stock on 1 November 2000 is $131? If so, compute the arbitrage profit.

Reference no: EM131637933

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