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(a) Consider a long forward contract to buy a non-dividend-paying stock in 3 months. Current stock price is $40 and 3-month risk-free interest rate is

(a) Consider a long forward contract to buy a non-dividend-paying stock in 3 months. Current stock price is $40 and 3-month risk-free interest rate is 5% per annum continuously compounded. If the current 3-month forward contract price is $39, explain how an arbitrageur locks in a risk-free profit and how much is the risk-free profit?

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