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3. On Jan. 3, 2019, an orange juice maker makes a European call option contract, expiring on Apr. 3, 2019, with a farmer who earned
3. On Jan. 3, 2019, an orange juice maker makes a European call option contract, expiring on Apr. 3, 2019, with a farmer who earned a Finance degree. The juice maker has a right to buy 1 million oranges at 3 per each and the farmer has an obligation to sell them at the price. (a) What are the possible outcomes of the juice maker's payoff? Use the below table. 1 2 3 4 5 6 Orange Price on Apr. 3 (ST) Long Call Payoff (max(ST - 6,0]) (b) What are the possible outcomes of the farmer's payoff? Use the below table. 1 2 3 4 5 6 Orange Price on Apr. 3 (ST) Short Call Payoff (min K - S7,0]) (c) Draw the long call payoff plot. (d) Draw the short call payoff plot
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