8. A bond will pay a coupon of $4 in two months' time. The bond's current price is $99.75. The two-month interest rate is 5% and the three-month interest rate is 6%, both in continuously compounded terms.
(a) What is the arbitrage-free three-month forward price for the bond?
(b) Suppose the forward price is given to be $97. Identify if there is an arbitrage opportunity and, if so, how to exploit it.
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