Question 2 Symbol Commodity/ Futures Delivery Date Price Last time traded CC=E Cocoa Dec 20 2,487.00 1:29PM EDT +22.00 +0.89% 19,525 95,796 KC=E Coffee Dec 20 117.60 1:29PM EDT +3.35 +2.93% 20,874 103,231 a. You are the General Manager of Caribbean Chocolate Limited and your Chief Operations Officer and Chief Financial Officer have just negotiated a contract to sell one thousand (1,000) tons of cocoa. It has been agreed that the price that will apply in the contract is the market price on December 20, 2020, Suppose the spot price today is USD$2040 per ton. Each futures contract is for the delivery of 10 tons of cocoa. Show how your company can hedge its position using a futures contract if i) The spot price on December 20 2020 is US$2600 per ton (4 marks) ii) The spot price on September 15 is US$2100.00 per ton (4 marks) iii) The price three months from now turns out to be $2600 per ton and the Chairman of the board is extremely upset that you did not benefit from the upward movement in price because of the positions taken in the futures market. Write a brief memo to him explaining the actions of your Chief Operating Officer and Chief Financial Officer. (4 marks) b. You are the chief financial officer in a company that uses coffee as the core ingredient in its product. You know you will require 150,000 pounds of coffee on December 2th0 2020 to meet a certain contract. The spot price of coffee $1 15.45 cents per pound and each contract is for the delivery of 25,000 pounds of coffee. Show how you intend to use futures contracts to hedge your position if i) the price of coffee turns out to be $110.95 per pound (4marks ) ii) the price of coffee turns out to be $122.05 per pound (4 marks)