You are a broker for frozen seafood products for Chayce Products You just signed a deal with a Belgian dotibutor Under the term of the contract, in one year you will deliver 400 kilograme of pon king crab for 13000 Fu Your cost for obtaining the king crab is $110,000. AB cash flows occur in exactly one year a. Plot your profits in one year bom the contract as a function of the exchange cafe in ona year, for exchange rates from 3 Tedged Prot b. Suppose the one year forward exchange rate is 51 25/C and that you enter into a forward contract to set t need pets bun the crab coad and the forward the exchange rats in one year Label this line Forward Hedg Cisang Suppose 30 contract, you consider using options A one-year call option to t of $1.25/Cis vading for 50.10/C To bodge the risk of your profts should you buy or sell the call or the pu 10/poptos Espe d. In the figure from parts (a) and (b) plot your "all in prolts using the option hedge (combed profts of crab contract option contact and on prices on a hunition of the exchange rate in one year Label this Hedge (Note You can ignore the effect of interest on the option price) food products As a resut, you dealancelled and you don't receive the Ears or or the cods of cung the cal e. Suppose that by the end of the year, a trade war erupts, leading to a European embargo on However, you still have the profits for losses) associated with your forward or options contract cancellation, which type of hedge has the least downside risk? Explain
