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Question 1 (25 marks) A juice manufacturer needs to buy orange juice in April 2022 for the production of concentrated orange juice. It is considering orange juice futures and options to hedge the price risk of a bad orange harvest. Information about futures and call option contract for orange juice is provided by the bank as shown below: April 2022 Futures at price of $1.40 per pound April 2022 Call option at strike price of $1.40 per pound with premium $0.09 per pound Each futures or option contract is for 15,000 pounds. Assume that only 1 futures or call option contract is bought Required: a What will the final cost to the firm be under futures and option contract if the price of the orange juice at expiration is: i $1.30 per pound? (8 marks) ii $1.65 per pound? (9 marks) b Discuss the pros and cons between buying futures and options under (i) and (ii) above. (8 marks)