A company has announced a rights offer that will require 4 rights to buy a new share in the offering at a subscription price of $40. When the market closed on the day before the ex-rights date, the company's stock was selling for $80 per share. The next morning, the stock sells for $72 per share and the rights sell for $6 each.

a. On the ex-rights date, are the stock and rights correctly priced?

b. Show how you could use the prices in part a to create an immediate profit.