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Consider the production of high - end electric bicycles ( e - bikes ) . You are a procurement manager for a company that manufactures

Consider the production of high-end electric bicycles (e-bikes).
You are a procurement manager for a company that manufactures these e-bikes. The demand for the e-bikes in the summer months (June, July, August) is normally distributed with a mean of 10,000 units and a standard deviation of 2,000 units.
Your supplier offers two types of contracts for the lithium-ion batteries needed in the e-bikes:
Forward Contract: You can buy batteries at a fixed price of $100 per battery.
Option Contract: You can pay an initial fee of $10 per battery for the right to buy batteries at a strike price of $105 per battery.
You also have the option to purchase on the spot market. The spot market price is forecasted to be normally distributed with a mean of $105 and a standard deviation of $15.
The question is: How many lithium-ion batteries should you purchase via forward contracts and option contracts?

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