Question: a. Explain how you would create a synthetic long forward contract. Use the following information to answer parts b, c and d: The current price

a. Explain how you would create a synthetic long forward contract. Use the following information to answer parts b, c and d: The current price of the underlying stock is $40. A one-year call with a strike price of $43 costs $1. A one-year put with a strike price of $43 costs $2. A forward contract is available for delivery of the underlying stock in one year at $41. The risk-free rate is an annual 5%. b. What is the price of a synthetic long forward contract the delivers the underlying stock in one year at $417 Explain clearly the arbitrage strategy to profit from these prices, d. Calculate the arbitrage profit today, per unit of stock. C

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