Free Money in the Creation Basket

An exchange-traded fund called the Nordic Shipping Trust is built from exactly three listed stocks. One share of the fund is redeemable for a basket of $2$ shares of Aker, $3$ shares of Borga, and $1$ share of Corve. Right now the screens show Aker at $\$12.50$, Borga at $\$8.00$, Corve at $\$31.00$, and the fund itself at $\$80.50$. You are an authorised participant, so you may hand a full basket of shares to the fund sponsor and receive fund shares in exchange (creation), or hand in fund shares and receive the basket (redemption), on the same day.

(a) What is the fund's fair value, and what trade locks in a riskless profit? How much per fund share?

(b) You sell $100{,}000$ fund shares and start buying the basket, but Corve halts for news after you have filled only the Aker and Borga legs. What exposure are you left holding, and how do you stay hedged until Corve reopens?