Given Information:

- ABC Farms Limited is expecting to harvest 200 tonnes of canola this fall.

- The company's CEO is concerned that canola prices may decrease by September when the crop is harvested and ready for sale.

- To hedge the risk of a decrease in price, the CEO enters into a futures option contract.

- Each option contract is for 20 tonnes, and the CEO wants to hedge the entire crop.

- The September futures option contract for canola has a strike price of $450 per tonne.

- The cost of the futures option is $25 (CAD) per tonne.

a) Will ABC Farms Limited buy or sell a call option contract(s) or a put option contract(s)? Why?

b) What does it cost to hedge the entire crop?

c) What is the net gain if the spot price of canola is $500 per tonne in September?

d) What is the net gain if the spot price of canola is $400 per tonne in September?

*Plesase show your work as best as possible including formulas used, Thank you.*