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 of

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 is $43 cost $1.

A one-year put with a strike price of $43 cost $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 $41.

c. Explain clearly the arbitrage strategy to profit from these prices.

d.Calculate the arbitrage profit today, per unit of stock.

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