15 points) On November 30, 2019 (at 7AM), Firm A and Firm B announced a merger agreement noting that:

The merger was expected to be completed by June 2020; and

2.5 shares of Firm A's stock were expected to be paid for each share of Firm B's stock (i.e., each share of Firm B can be swapped for 2.5 shares of Firm A if the merger is completed).

On November 30, 2019 (at 4PM):

Firm A's stock closed at $42 per share; and

Firm B's stock closed at $60 per share.

Identify a risk arbitrage opportunity arising from the merger agreement announcement. You need to note:

Which stock and the amount of shares (if any) that you are buying;

Which stock and the amount of shares (if any) that you are short-selling; and

The profit arising from the risk arbitrage opportunity.